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AGRICULTURE 


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UNIVERSITY  OF  ILLINOIS 

Agricultural  Experiment  Station 


BULLETIN  No.  293 


ADJUSTING  HOG  PRODUCTION 
TO  MARKET  DEMAND 

IN  COOPERATION  WITH  THE  BUREAU  OF 
AGRICULTURAL  ECONOMICS,  U.  S.  DEPARTMENT  OF  AGRICULTURE 

By  F.  F.  ELLIOTT 


URBANA,  ILLINOIS,  JUNE,  1927 


CONTENTS 

PAGE 

PARTI.  WHY  HOG  PRICES  FLUCTUATE 504 

INFLUENCE  OF  VARIOUS  DEMAND  FACTORS  ON  PRICE 507 

The  Demand  of  the  Consumer 507 

Price  of  Substitute  Products 509 

General  Business  Conditions 509 

Storage  Holdings  of  Pork  and  Pork  Products 509 

Foreign  Demand  for  Pork  and  Pork  Products 510 

Increase  in  Population 511 

How  THE  SUPPLY  OF  HOGS  AFFECTS  PRICE 512 

RELATIVE  IMPORTANCE  OF  THE  VARIOUS  PRICE  FACTORS 513 

PART  II.     CAUSES  OF  YEARLY  FLUCTUATIONS  IN  THE  SUPPLY  OF 

HOGS        514 

FACTORS  THAT  INFLUENCE  A  FARMER'S  INCLINATION  TO  GO  INTO  HOG 

PRODUCTION 515 

Corn-Hog  Ratio  One  of  First  Factors 515 

Effect  of  December  Corn-Hog  Ratio 518 

Effect  of  June-November  Corn-Hog  Ratio 520 

Effect  of  January-March  Corn-Hog  Ratio 521 

Effect  of  All  Three  Corn-Hog  Ratios 523 

Hog-Steer  Ratio  a  Minor  Factor 523 

FACTORS  THAT  LIMIT  A  FARMER'S  ABILITY  TO  PRODUCE  HOGS     .     .     .      .  525 

Lack  of  Breeding  Stock,  Capital,  Equipment 525 

FACTORS  THAT  WORK  AGAINST  A  FARMER'S  EFFORTS  IN  HOG 

PRODUCTION 526 

Weather  Conditions  at  Farrowing  Time 526 

Disease 527 

THE  UPWARD  TREND  IN  PRODUCTION 528 

RELATIVE  IMPORTANCE  OF  VARIOUS  SUPPLY  FACTORS 528 

PART  III.  RESPONSE  OF  HOG  PRODUCERS  IN  DIFFERENT  SECTIONS 

OF  ILLINOIS  TO  CORN-HOG  RATIO 529 

GRAIN  SECTION,  EAST-CENTRAL  ILLINOIS 530 

LIVESTOCK  SECTION,  WESTERN  ILLINOIS 531 

WHEAT  AND  DAIRY  SECTIONS 532 

PART  IV.  AD  JUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND   .      .  533 

SUCCESSFUL  FARMERS  POINT  THE  WAY 533 

PRACTICES  OF  THE  MAJORITY  OF  FARMERS        542 

POSSIBILITIES  OF  SMOOTHING  OUT  THE  HOG-PRICE  CYCLE  .  544 


STATISTICAL  APPENDIX  .  547 


ADJUSTING  HOG  PRODUCTION 
TO  MARKET  DEMAND 

By  F.  F.  ELLIOTT,  Formerly  Associate  in  Farm 
Organization  and  Management1 

Illinois  farmers  produce  and  send  to  market  each  year  from  4  to  6 
million  hogs.  These  hogs  return  to  their  owners  on  an  average  a  gross 
annual  income  of  75  to  100  million  dollars.  In  addition  to  being  the 
chief  direct  source  of  income  on  many  farms,  hogs  furnish  year  in  and 
year  out  probably  the  best  market  for  the  corn  crop,  which  is  the  prin- 
cipal crop  grown.  They  also  provide  a  market  for  waste  and  low- 
grade  grains,  legume  forages,  and  other  feeds  which  likely  would  be 
less  profitably  utilized  by  other  means,  if  at  all.  It  is  apparent,  con- 
sequently, that  anything  which  affects  the  profitableness  of  hog  pro- 
duction is  of  vital  concern  to  the  Illinois  farmer. 

There  are  many  things  which  determine  the  profitableness  of  the 
hog  enterprise.  Some  have  to  do  with  production  methods,  others  with 
time  of  marketing,  changes  in  demand  and  supply,  adjustments  in  pro- 
duction, and  so  forth.  While  fully  recognizing  the  importance  of  adopt- 
ing efficient  methods  and  practices,  the  present  bulletin  is  concerned 
primarily  with  an  analysis  of  the  factors  which  cause  fluctuations  in 
demand  for  hogs,  and  the  importance  of  keeping  production  adjusted 
to  changing  conditions  of  the  market. 

The  periodic  gluts  and  depressions  of  the  market  at  the  present 
time  are  one  of  the  great  handicaps  to  profitable  hog  production.  This 
is  a  condition  which  producers  themselves  can  do  much  to  remedy.  It 
is  well  known  that  when  the  price  of  hogs  is  high  in  comparison  with 
the  price  of  corn  there  is  a  tendency  to  go  into  hog  production  too 
heavily,  production  is  increased  too  far  and  an  oversupply  results.  The 
surplus  causes  a  sharp  decline  in  price.  With  low  prices  prevailing,  the 
majority  of  producers  tend  to  reduce  their  hog  production  too  much. 
They  cut  down  too  drastically  just  as  they  increase  too  far  when  prices 
are  favorable.  This  in  turn  leads  inevitably  to  a  relative  scarcity  of 
hogs,  and  the  price  increases  considerably.  This  favorable  situation 
does  not  continue  very  long,  however,  until  farmers  again  begin  to  in- 
crease their  production,  and  in  a  short  time,  usually  fifteen  to  eighteen 
months  later,  the  supply  is  more  than  adequate  to  meet  the  demand, 
and  the  price  falls  again. 


'Mr.  Elliott  is  now  Agricultural  Economist,  Bureau  of  Agricultural  Econcmics,  U.  S.  Department  of  Ag- 
riculture. 

503 


504  BULLETIN  No.  293  [June, 

Before  producers  can  adjust  their  production  with  any  degree  of 
success  to  market  demand  and  avoid  periods  of  overproduction,  they 
must  first  have  some  knowledge  of  the  factors  that  bring  about  mar- 
ket changes  and  how  these  factors  operate.  Parts  I  and  II  of  this  bul- 
letin are  designed  to  throw  light  upon  this  subject  and  to  indicate  spe- 
cifically the  more  important  factors  which  determine  the  price  and 
supply  of  hogs.  Part  III  shows  how  farmers  in  Illinois  have  responded 
to  the  principal  factor  affecting  production,  namely,  the  corn-hog  ratio. 
Part  IV  seeks  to  answer  the  question,  What  can  the  Illinois  farmer  do 
to  help  stabilize  market  conditions  and  thereby  make  hog  production 
a  more  profitable  part  of  the  farm  business? 


PART  I 
WHY  HOG  PRICES  FLUCTUATE1 

During  the  past  few  years  the  Illinois  farmer  has  seen  rather  wide 
fluctuations  in  the  price  of  his  products.  These  fluctuations  have  not 
been  confined  to  any  one  product  tho  some  have  fluctuated  more  widely 
than  have  others.  Fig.  1  shows  the  monthly  fluctuations  in  the  price  of 
heavy  hogs  at  Chicago  from  1904  to  1925.  Were  the  chart  enlarged  to 
include  prices  for  even  earlier  years,  the  same  general  movements  would 
be  exhibited. 

j  Three  fairly  distinct  movements  in  the  price  of  hogs  are  discern- 
ible. These  price  movements  may  be  designated  as:  (1)  trend  move- 
ments, (2)  seasonal  movements,  (3)  cyclical  movements. 

Trend  of  Hog  Prices.  Probably  the  most  noticeable  of  these  move- 
ments in  the  price  of  hogs,  apart  from  the  striking  upward  bulge  from 
the  latter  part  of  1916  to  the  middle  of  1920,  is  the  gradual  upward 
tendency  thruout  the  greater  portion  of  the  period  covered  by  the  chart. 
Whereas  the  average  monthly  price  was  $5.05  per  100  pounds  for  the 
year  1900,  it  was  $8.51  for  1924. 

It  would  not  be  accurate  to  conclude  from  these  figures,  however, 
that  the  hog  producer  necessarily  was  better  off  in  1924  than  he  was  in 
1900.  Before  it  is  possible  to  arrive  at  an  accurate  conclusion  it  is 
necessary  to  know  the  relative  purchasing  power  of  the  dollar  at  the  two 


irrhe  discussion  of  why  hog  prices  fluctuate  is  based  largely  on  the  statistical  anal- 
ysis of  hog  prices  made  by  Messrs.  Ezekiel  and  Haas  of  the  Bureau  of  Agricultural 
Economics,  U.  S.  Department  of  Agriculture,  as  published  in  Department  Bulletin 
No.  1440,  "Factors  Affecting  the  Price  of  Hogs."  The  writer  wishes  to  express  to  them 
and  to  Mr.  H.  R.  Tolley,  of  the  Bureau,  his  appreciation  for  many  helpful  sugges- 
tions and  criticisms  both  on  this  section  and  on  other  parts  of  the  bulletin. 


1927] 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


505 


1904  1905  1906  1907  1906  1909   1910    1911    1912   1913   1914.  1915   1916    1917   1918   1919  1920  1921  1922  1923  1924  1925 


FIG.  1. — MONTHLY  AVERAGE  PRICE  OF  HEAVY  HOGS  AT  CHICAGO  FROM 

1904  TO  1925 

Note  (1)  that  the  level  of  the  price  is  higher  at  the  end  of  the  period  than  at  the 
beginning,  that  is,  that  the  general  trend  of  price  has  been  upward;  (2)  that  prices 
move  up  and  down  in  successive  swings  over  a  period  of  years,  or  in  what  is  known 
as  price  cycles;  and  (3)  that  they  tend  to  be  high  in  the  spring  and  fall  each  year  and 
low  in  the  summer  and  winter,  these  variations  being  known  as  seasonal  movements. 


PRICE  PER  CWT. 

IN  1910  -  191*  DOLLARS 


n 


TO 


1904  '05    '06     '07     '08    -09     '10     'II      '12     '13 


'15     '16     '17     '18     '19    '20     71     12    '23    '24    '25 


FIG.  2. 


PRICE  OF  HEAVY  HOGS  AT  CHICAGO  FOR  1904  TO  1925  EXPRESSED  IN  TERMS 

OF  1910-1914  DOLLARS 

The  producer  is  more  interested  in  knowing  what  the  price  of  hogs  is  in  terms 
of  what  his  dollars  will  buy  than  he  is  in  knowing  merely  the  money  price.  This  chart 
has  therefore  been  arranged  to  show  how  hog  prices  have  fluctuated  since  1904  after 
changes  due  to  the  changes  in  the  value  of  money  have  been  taken  out.  The  cor- 
rection was  made  by  dividing  each  monthly  price  by  the  index  of  all  commodities 
for  that  month. 


506 


BULLETIN  No.  293 


[June, 


periods.  By  the  purchasing  power  of  the  dollar  is  meant  the  amount  of 
"all  commodities"  which  it  will  buy.  It  is  customary  to  take  the  pur- 
chasing power  for  some  pre-war  period,  such  as  from  1909-1914,  as 
normal  or  100.  Upon  this  basis  the  dollar  in  1900  had  a  purchasing 
power  of  121.9,  and  in  1924,  65.6.  Or  to  state  it  another  way,  the  dollar 
in  1924  would  have  purchased  in  all  commodities  only  53.7  percent  as 
much  as  in  1900.  Applying  this  fact  to  the  price  of  hogs  we  find  that  the 
returns  from  100  pounds  of  live  hogs  in  1900  ($5.05)  would  have  pur- 
chased as  much  as  would  the  returns  from  110  pounds  in  1924  ($9.36). 


DOLLARS 
PER  CWT. 


1904     1905    1906     1907      1908    1909     1910      1911      1912      1913      1914     1915 


FIG.  3. — ACTUAL  HOG  PRICES  FROM  1904  TO  1915  WITH  VARIATIONS  DUE  TO 
SEASON  ELIMINATED  IN  THE  MOVING  AVERAGE 

This  graph  shows  how  prices  swing  first  above  and  then  below  the  long-time 
trend,  the  trend  being  represented  by  the  straight  line  and  the  cycles  by  the  moving 
average. 


Fig.  2  shows  how  the  monthly  price  of  heavy  hogs  at  Chicago  from 
1904  to  1925  has  varied  when  expressed  in  terms  of  the  1910-1914 
dollar,  or  in  terms  of  a  dollar  with  constant  purchasing  power.  It  is 
apparent  that  the  trend  in  hog  prices  has  been  upward  for  most  of  the 
period.  While  it  was  downward  from  1919  to  1923,  it  turned  upward 
again  in  1924. 

Seasonal  Movements  in  Hog  Prices.  The  monthly  fluctuations  in 
hog  prices  appear  to  be  of  a  very  irregular  nature.  Close  examination, 
however,  reveals  a  fairly  definite  and  clearly  discernible  movement 
from  one  month  to  the  next  and  from  season  to  season.  Thus  hog  prices 
are  usually  higher  in  April  and  September  than  in  June  and  December; 


1927]  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  507 

higher  in  the  spring  and  fall  than  in  the  summer  and  winter.  This 
seasonal  movement  must  be  taken  into  account  when  comparison  is 
made  between  prices  at  different  periods  of  the  year. 

Cyclical  Movements  in  Hog  Prices.  A  third  movement  of  hog  prices 
which  is  clearly  discernible  from  Fig.  1  is  the  tendency  for  periods  of 
high  and  low  prices  to  follow  each  other  at  fairly  definite  intervals.  This 
tendency  for  the  price  to  swing  up  and  down  in  cycles  has  come  to  be 
designated  as  the  "hog-price  cycle."  During  the  past  twenty-five  years 
these  up  and  down  swings  have  had  a  duration  of  around  three  years, 
altho  they  sometimes  have  extended  over  a  shorter  period  and  some- 
times a  longer  one.  Prices  swing  downward  usually  for  a  period  of  18  to 
24  months  and  then  reverse  themselves  for  about  the  same  period. 
The  moving  average  in  Fig.  3  shows  the  cyclical  movements  in  hog 
prices  after  the  trend  and  seasonal  movements  have  been  taken  out. 

In  the  discussion  which  follows  attention  will  be  confined  to  the 
most  important  factors  determining  the  price  of  hogs.  The  analysis 
will  begin  by  considering  the  factors  influencing  the  demand  for  hogs. 

INFLUENCE  OF  VARIOUS  DEMAND  FACTORS  ON  PRICE 
The  Demand  of  the  Consumer 

Stated  in  the  simplest  terms  it  may  be  said  that  what  the  con- 
sumer will  pay,  or  can  be  induced  to  pay,  for  pork  and  pork  products 
will  determine  what  the  buyers  of  live  hogs  can  pay.  That  the  buyers 
of  live  hogs  can  pay  no  more  than  this  and  stay  in  business  is  obvious. 
It  is  also  evident  that  they  cannot  pay  even  this  much,  since  their 
operating  and  overhead  expenses,  as  well  as  any  margin  they  receive 
for  doing  business,  must  all  come  out  of  the  price  the  consumer  pays. 

Consumers  as  such  have  no  direct  demand  for  live  hogs  but  they  do 
have  a  demand  for  the  dressed  cuts  of  meat.  They  indicate  this  demand 
to  their  retailers  by  being  willing  to  buy  a  certain  amount  of  meat  or 
meat  products  at  a  given  price.  If  they  are  willing  to  buy  a  larger  amount 
at  the  same  price  or  the  same  amount  at  a  higher  price,  the  retailers  con- 
clude that  their  demand  is  increasing  and  indicate  this  fact  by  placing 
larger  orders  for  meat  or  offering  higher  prices  for  it.  On  the  other 
hand,  if  consumers  do  not  indicate  a  willingness  to  purchase  the  usual 
amount  of  meat  or  meat  products  at  the  prevailing  prices  this  fact  also 
is  soon  relayed  back  to  the  central  markets  and  likewise  will  be  reflected 
in  the  price  of  live  hogs. 

Of  course  this  process  does  not  work  quite  so  simply  as  stated  here. 
High  retail  prices  are  not  immediately  reflected  in  high  prices  of  live 
hogs  in  the  central  markets,  tho  they  ultimately  will  be  so  expressed. 


508 


BULLETIN  No.  293 


[June, 


Neither  will  the  producers  of  hogs  necessarily  get  the  entire  benefit  of 
the  increased  demand.  The  retail  and  wholesale  agencies  operating 
between  the  consumer  and  the  producer  also  receive  a  part  of  the 
benefit. 

That  there  is  a  very  close  correspondence  between  the  move- 
ment of  the  prices  of  live  hogs  and  the  dressed  cuts  of  meat  will  be 
noted  from  Fig.  4.  The  margin,  however,  between  the  wholesale  and 


FIG.  4. — FARM  AND  MARKET  PRICES  OF  HOGS  AND  WHOLESALE  AND  RETAIL  PRICES 

OP  PORK  AND  LARD  FROM  1913  TO  1925 

The  prices  of  pork  products  at  each  step  from  farmer  to  consumer  are  shown  in 
this  chart.  While  prices  for  the  various  products  tend  to  move  together  thruout  the 
period  shown,  in  some  years  prices  for  certain  of  the  dressed  products,  such  as  pork 
loins,  moved  up,  while  those  of  some  of  the  other  products  moved  down. 


retail  prices  has  varied  somewhat  from  year  to  year.  This  would  be 
expected  since  the  costs  of  capital,  labor,  materials,  etc.,  vary,  and  do 
not  necessarily  increase  or  decrease  with  the  prices  of  the  products  into 
whose  production  they  enter. 

There  are  many  factors  which  by  influencing  the  demand  for  pork 
and  pork  products  influence  the  demand  for  live  hogs.  These  are,  (1) 
the  price  of  substitute  products,  (2)  general  business  conditions,  (3) 
storage  holdings,  (4)  pork  exports  or  foreign  demand,  (5)  increase  in 
population.  Each  of  these  factors  needs  further  discussion. 


1927}  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  509 

Price  of  Substitute  Products 

Consumers  vary  widely  in  their  wants  and  consumption  habits. 
They  also  vary  widely  in  their  incomes  and  purchasing  power.  As  a 
result  they  assign  different  degrees  of  importance  to  goods.  Pork  and 
pork  products,  for  example,  will  be  purchased  by  people  with  large 
incomes  regardless  of  how  high  the  price  goes.  In  the  lower  income 
groups,  however,  with  people  who  have  to  make  each  dollar  go  as  far  as 
possible,  the  height  of  the  price  has  a  good  deal  to  do  with  how  much 
they  will  buy.  If  pork  prices  get  out  of  line  with  other  prices,  they  will 
substitute  either  beef  or  mutton,  dairy  products,  or  possibly  consume 
more  fruit  and  vegetables.  So  one  of  the  first  factors  that  influences  the 
demand  for  pork  and  pork  products  is  the  price  of  substitute  products. 

General  Business  Conditions 

As  would  be  expected,  there  is  a  fairly  close  relationship  between 
the  demand  for  hogs  and  the  general  level  of  prosperity  of  the  business 
community.  When  business  is  active,  employment  steady,  and  wages 
high,  each  individual  consumer  has  more  income  to  spend.  He  reflects 
his  increased  prosperity  by  purchasing  more  freely  of  all  products,  pork 
products  included.  These  increased  purchases,  whether  resulting  from 
purchasing  more  pork  and  pork  products  at  the  same  price  or  the  same 
amount  at  higher  prices,  represent  an  increased  demand.  This  increased 
demand  for  the  dressed  cuts  will  be  passed  back  by  the  retailers  to  the 
wholesalers  and  packers,  and  will  eventually  be  reflected  in  the  price  of 
live  hogs  in  the  same  way  as  was  explained  previously. 

Storage  Holdings  of  Pork  and  Pork  Products 

There  is  considerable  variation  in  the  receipts  of  live  hogs  at  the 
central  markets;  consequently  there  necessarily  is  some  variation  in 
slaughter  from  day  to  day  and  month  to  month.  All  the  hogs  that  are 
slaughtered  are  not  immediately  sent  into  consumption  channels,  but  the 
excess  slaughter  from  day  to  day  and  week  to  week  is  carried  over  and 
held  in  storage  for  later  consumption.  Thus  storage  provides  the  means 
and  performs  the  important  function  of  insuring  an  adequate  supply  of 
pork  and  pork  products  at  the  particular  time  and  in  the  exact  form 
desired  by  the  consuming  public. 

To  the  man  who  has  live  hogs  to  sell  large  storage  supplies  act  as  a 
check  upon  demand.  He  will  find  that  the  buyers  in  the  central  markets 
will  not  be  disposed  to  bid  very  high  for  live  hogs  when  the  supply 
available  is  adequate  to  take  care  of  ordinary  consumption  needs.  On 
the  other  hand,  if  the  amount  of  pork  and  pork  products  is  low  and  the 


510 


BULLETIN  No.  293 


[June, 


demand  for  these  products,  as  indicated  by  retail  orders,  is  steady  or 
increasing,  the  buyers  of  live  hogs  will  be  inclined  to  buy  more  heavily, 
and  in  order  to  insure  that  an  adequate  supply  will  be  forthcoming  will 
offer  higher  prices  if  necessary  to  get  them. 

Foreign  Demand  for  Pork  and  Pork  Products 

The  total  production  of  pork  and  pork  products  in  the  United 
States  is  normally  much  larger  than  is  needed  for  domestic  consumption. 
A  considerable  portion  of  our  production  consequently  must  depend  upon 
foreign  markets  for  an  outlet.  Most  of  this  excess  production  is  taken 
by  the  countries  of  Western  Europe. 


;        1904    1905  1906   1907    1908   1909    1910     1911     1912     1913     1914    1915    1916    1917    1918    1919    1920   1921    1922  1923  1924  1925 

C> 

FIG.  5. — MONTHLY  EXPORTS  OF  HOG  PRODUCTS  FROM  1904  TO  1925  IN 
TERMS  OF  POUNDS  OF  PORK  OR  EQUIVALENT 

The  various  pork  products  were  thrown  into  an  index  and  weighted  according 
to  the  relative  prices  at  which  each  sold  for  export  from  1910  to  1914.  Using  pork  as 
a  base  and  giving  it  a  weight  of  100,  lard  had  a  weight  of  103,  bacon  119,  hams  and 
shoulders  122. 


We  normally  export  about  one-sixth  of  our  total  production  of  pork 
and  pork  products.  In  the  year  1924  this  class  of  exports  amounted  to 
the  enormous  total  of  1,933  million  pounds.  This  compares  with  a  five- 
year  post-war  (1920-1924)  average  export  total  of  1,705  million  pounds 
and  a  five-year  pre-war  (1910-1914)  average  export  total  of  911  million 
pounds.  These  totals  include  exports  of  fresh,  canned,  and  pickled  pork, 
cured  hams  and  shoulders,  bacon,  lard,  and  neutral  lard.  Of  these  totals, 
lard  and  cured  pork  comprize  the  major  portion.  In  Fig.  5  are  shown  these 
monthly  exports  of  pork  and  pork  products  from  the  United  States  in 
the  period  from  1904  to  1925.  These  are  expressed  in  terms  of  a  general 
index  into  which  the  various  products  have  been  thrown  and  weighted 


1927}  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  511 

according  to  the  average  price  at  which  each  sold  for  export  during  the 
period  1910  to  1914.1 

Foreign  buyers  indicate  their  demand  for  pork  and  pork  products 
by  being  willing  to  take  a  certain  quantity  at  a  given  price.  If  they  are 
willing  to  take  more  at  the  same  price  or  the  same  amount  at  a  higher 
price,  the  American  seller  will  consider  that  their  demand  is  increasing 
and  will  indicate  this  fact  either  by  passing  on  larger  orders  or  by  offering 
higher  prices.  If  storage  holdings  are  large,  this  increased  foreign  demand 
will  first  be  met  by  pulling  some  of  these  storage  stocks  into  consumption. 
Sooner  or  later,  however,  these  larger  stocks  in  storage  will  become 
depleted,  and  in  order  to  fill  the  incoming  orders  the  buyers  of  hogs  will 
go  into  the  market  and  make  heavier  purchases  of  live  hogs.  Thus  the  in- 
creased foreign  demand  is  reflected  in  the  price  of  live  hogs. 

Whether  the  foreign  demand  for  pork  and  pork  products  at  any 
particular  time  is  high  or  low  will  be  determined  by  a  number  of  things, 
the  chief  of  which  are  the  purchasing  power  of  the  foreign  consumer, 
general  business  conditions  in  foreign  countries,  the  relation  between  the 
price  of  pork  and  pork  products  and  the  price  of  substitute  products  in 
foreign  markets,  as  well  as  all  the  other  intricate  and  puzzling  factors 
which  influence  international  trade,  such  as  exchange  rates,  tariffs, 
governmental  policy,  etc. 

Increase  in  Population 

An  additional  major  factor  which  influences  the  demand  for  pork 
and  pork  products  and  thereby  for  live  hogs  is  that  of  increase  in  popu- 
lation. This  factor  is  especially  important  when  attempting  to  explain 
the  difference  in  price  over  a  period  of  years  or  in  attempting  to  ascer- 
tain what  prices  will  be  in  the  future. 

During  the  past  decade  our  population  increased  about  15  percent. 
In  previous  decades  the  increase  was  even  more  rapid.  This  increase  in 
population  means  more  people  to  feed;  hence  increased  quantities  of 
pork  products  are  required  if  per  capita  consumption  is  to  be  main- 
tained. While  the  per  capita  consumption  of  pork  products  varies  from 
year  to  year  and  from  cycle  to  cycle,  with  the  exception  of  a  slight  down- 
ward trend  it  has  been  maintained  at  a  fairly  stable  level  since  1900.  In 
the  same  period  the  trend  in  the  prices  of  hogs  in  terms  of  purchasing 
power  has  been  decidedly  upward.  Apparently  consumers  have  been 
willing  to  pay  higher  prices  for  the  same  quantity;  which  means,  of 
course,  an  increased  demand. 


pork  as  a  base  and  giving  it  a  value  of  100,  lard  had  a  weight  of  103; 
bacon,  119;  ham  and  shoulders,  122. 


512  BULLETIN  No.  293  [June, 

The  influence  which  such  an  increase  in  demand  will  have  upon  the 
price  of  hogs  will  be  determined  by  the  rapidity  with  which  the  supply 
will  be  increased  to  meet  the  demand.  If  the  demand  increases  faster 
than  the  supply,  then  its  influence  will  be  reflected  in  an  upward  trend  in 
price.  If  supply  increases  more  rapidly  than  demand,  then  the  opposite 
effect  will  result  and  we  shall  have  a  downward  trend  in  price. 

HOW  THE  SUPPLY  OF  HOGS  AFFECTS  PRICE 

Up  to  this  point  the  analysis  has  been  confined  to  a  discussion  of  the 
circumstances  which  influence  the  demand  for  live  hogs  and  their  effect 
on  price.  Nothing  has  been  said  about  the  influence  which  the  supply 
of  hogs,  the  most  important  single  factor,  exerts  upon  price. 

Considering  supply  as  one  total  factor  balanced  against  all  the 
factors  that  go  to  make  up  demand,  we  find  what  we  should  expect  to 
be  true,  namely,  that  when  the  supply  is  large  the  price  is  low,  and  when 
the  supply  is  small  the  price  is  high  (Fig.  6).  While  this  relationship  is 

RECEIPTS    DOLLARS 

THOUSANDS  I  PER  CWT. 


FIG.  6. — CHANGES  IN  RECEIPTS  AND  IN  PRICE  OF  HOGS  AT  CHICAGO 
FROM  SEPTEMBER  TO  APRIL  OF  EACH  YEAR,  1900  TO  1925 

When  production  is  low  the  price  is  high,  and  when  production 
is  high  the  price  is  low. 

clearly  defined  even  in  weekly  receipts  and  prices,  it  is  much  more 
distinctly  shown  over  a  longer  period.  This  is  because  buyers  of  live 
hogs  will  not  be  influenced  to  bid  very  high  by  a  temporary  shortage  of 
hogs  on  a  particular  daily  or  weekly  market  if  they  think  there  are  large 
numbers  still  on  farms  which  will  soon  come  to  market. 

Daily,  weekly,  and  seasonal  fluctuations  in  the  supply  of  hogs  are 
due  to  a  number  of  circumstances  such  as  the  nature  of  the  hog  enter- 
prise, the  conditions  under  which  hogs  are  raised  and  fattened,  and 
variations  in  farmers'  resources  and  their  reactions  to  market  conditions. 


1927}  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  513 

The  great  bulk  of  hogs  produced  in  the  United  States  come  from  the 
corn-belt  states  of  the  Middle  West.  In  this  section  the  winters  are  rather 
long  and  severe.  This  makes  winter  hog  production  probably  more  un- 
certain and  expensive  than  summer  production.  More  expensive  build- 
ings and  equipment  and  better  care  are  required  when  pigs  are  farrowed 
in  the  winter.  Also  more  feed  is  likely  to  be  required  to  produce  a  given 
gain  in  the  winter  time.  This  is  particularly  true  with  the  conditions 
under  which  the  majority  of  farmers  produce  hogs.  These  and  other  con- 
siderations probably  have  been  the  main  reasons  why  farmers  in  the 
corn  belt  plan  to  have  the  major  portion  of  their  pigs  farrowed  in  the 
spring  or  summer  months.  Having  a  large  amount  of  corn  available, 
they  push  the  pigs  and  plan  to  market  them  when  they  are  6  to  9 
months  old.  This  accounts  for  the  large  receipts  in  the  later  fall  and 
winter  months  and  explains  why  receipts  are  low  in  early  fall  and  spring. 

Variations  in  receipts  from  day  to  day  and  week  to  week  arise 
because  farmers  do  not  interpret  a  given  market  situation  in  the  same 
way,  and  because  they  are  producing  under  different  conditions  and 
financial  circumstances.  A  temporary  rise  in  price  may  cause  some 
farmers  to  hurry  their  shipments  in  an  attempt  to  take  advantage  of  the 
favorable  market.  Other  farmers  under  the  same  circumstances  will 
hold  on  longer  and  feed  out  to  heavier  weights.  It  is  things  like  these 
that  cause  short-time  fluctuations  in  receipts  and  in  prices. 

RELATIVE  IMPORTANCE  OF  THE  VARIOUS  PRICE  FACTORS 

In  the  foregoing  pages  the  factors  determining  the  price  of  hogs 
have  been  enumerated  and  discussed.  No  pretense  is  made  that  these 
are  the  only  factors  influencing  the  price  of  hogs.  No  doubt  there  are  a 
good  many  others  which  have  a  slight  influence,  some  of  them  capable 
of  statistical  measurement  and  others  not.  The  influence  of  all  these 
other  factors,  however,  is  relatively  insignificant  as  compared  with  the 
important  influence  of  those  here  discussed,  amounting  probably  to  less 
than  15  percent. 

Supply  of  hogs  (including  storage  holdings)  is  the  most  important 
single  factor  in  determining  the  price  of  hogs.  Increases  in  population 
and  changes  in  the  value  of  money  are  next  in  importance,  followed  by 
foreign  demand  for  pork  products,  the  price  of  substitute  products,  and 
general  business  conditions.1 

This  brings  us  to  the  next  question,  What  causes  the  supply  of 
hogs  to  fluctuate?  This  is  discussed  in  Part  II,  which  follows. 

1Using  these  factors  and  correlating  them  with  the  price  of  hogs,  Ezekiel  and 
Haas,  in  U.  S.  Department  of  Agriculture  Bulletin  No.  1440,  were  able  to  account  for 
approximately  88  percent  of  the  total  monthly  variations  in  the  price,  leaving  only 
12  percent  unaccounted  for,  which  is  of  negligible  importance  as  compared  with  the 
total. 


514  BULLETIN  No.  293  [June, 

PART  II 

CAUSES  OF  YEARLY  FLUCTUATIONS  IN  THE 
SUPPLY  OF  HOGS 

We  have  noted  briefly  some  of  the  causes  for  short-time  fluctuations 
in  the  supply  of  hogs.  We  may  now  consider  long-time  fluctuations  and 
ask  why  it  is  that  a  large  supply  of  hogs  is  produced  one  year  and  only 
a  year  or  year  and  a  half  later  a  supply  not  nearly  so  large.  The  answer 
to  this  question  will  involve  a  discussion  of  all  the  factors  which  farmers 
take  into  consideration  when  they  begin  to  breed  for  the  market.  Daily 
and  weekly  fluctuations  are  market  phenomena  and  have  to  do  with  the 
manner  in  which  the  supply  is  disposed  of  after  it  is  in  existence.  These 
other  factors  go  further  and  explain  why  there  is  a  supply  in  the  first 
place,  and  why  it  is  larger  at  one  time  than  it  is  at  other  times. 

Now  in  this  connection  the  reader  must  bear  in  mind  that  we  are 
attempting  to  get  at  the  factors  which  the  mass  of  farmers  take  in  con- 
sideration when  they  go  into  hog  production.  It  is  not  assumed  that  all 
farmers  are  actuated  by  the  same  considerations,  or  that  they  are  in- 
fluenced to  the  same  degree  by  any  one  factor.  Each  farmer  will  interpret 
a  given  situation  in  the  light  of  his  own  knowledge,  experience,  and 
peculiar  conditions;  but  since  it  is  impossible  to  make  a  separate  study  of 
the  factors  which  each  individual  farmer  takes  into  consideration  in  his 
production  of  hogs,  attention  must  be  confined  to  an  analysis  of  those 
which  the  majority  of  farmers  consider. 

Taking  receipts  of  hogs  at  Chicago  as  a  measure  of  the  supply 
from  year  to  year,  an  analysis  was  made  of  the  relative  effect  of  a 
large  number  of  factors  upon  receipts.  Some  ten  to  fifteen  in  all  were 
considered,  among  which  the  following  were  included:  the  relation 
between  corn  and  hog  prices;  the  relation  between  hog  and  steer  prices; 
size  of  the  merchantable  corn  crop  or  percentage  of  non-merchantable 
corn ;  number  of  breeding  sows  on  farms ;  loss  from  disease ;  climatic  con- 
ditions at  farrowing  time;  trend  in  production,  etc. 

A  question  may  here  arise  in  the  minds  of  some  readers  whether  the 
above  factors  really  represent  all  the  important  ones  that  influence 
receipts.  Since  oats,  barley,  and  wheat  to  some  extent  are  used  as  feeds 
for  hogs  at  certain  times,  also  tankage  and  mill  feeds,  the  reader  may  be 
wondering  why  an  oats-hog  ratio,  barley-hog  ratio,  wheat-hog  ratio, 
etc.,  were  not  considered.  When  the  analysis  was  made,  these  ratios 
were  taken  into  consideration  but  they  were  not  used  as  independent 
factors  because  it  was  assumed  that  there  was  such  a  high  correlation 
between  them  and  the  corn-hog  ratio  that  when  the  intercorrelations 
were  corrected  for,  their  net  influence  would  be  nil.  Subsequent  statis- 


1927}  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  515 

tical  analysis  confirmed  this  hypothesis  (see  Statistical  Appendix). 
All  these  factors  likely  to  influence  receipts  may  be  divided  into 
three  main  groups:  those  influencing  a  farmer's  inclination  to  go  into 
hog  production,  those  influencing  his  ability  to  go  into  the  enterprise,  and 
those  which  tend  to  work  against  or  to  defeat  his  efforts. 

FACTORS  THAT  INFLUENCE  A  FARMER'S  INCLINATION  TO 
GO  INTO  HOG  PRODUCTION 

Corn-Hog  Ratio  One  of  First  Factors 

Farmers  in  Illinois  and  most  of  the  other  corn-belt  states  begin 
to  breed  their  sows  for  spring  litters  around  December  1,  tho  many 
sows  are  bred  in  November  and  also  in  January.  What  are  the  things 
they  take  into  consideration  when  they  begin  to  breed? 

In  the  first  place  they  probably  consider  the  price  at  which  hogs 
are  selling  at  the  time.  If  the  price  is  high,  they  may  be  inclined  to  breed 
more  sows  than  if  it  is  low.  It  does  not  follow  necessarily,  however,  that 
they  will  breed  more  sows  just  because  of  a  high  price  of  hogs,  as  a  price 
is  only  high  or  low  by  comparison  with  some  other  price.  That  is  to  say, 
a  high  price  is  only  relative;  for  the  hog  producer  the  price  of  hogs  is 
either  high  or  low  as  it  relates  to  the  price  of  corn,  to  the  price  of  cattle, 
or  to  the  price  of  some  other  product.  So  instead  of  considering  the  price 
of  hogs  alone,  the  farmer  probably  gives  more  consideration  to  the  rela- 
tionship between  the  price  of  hogs  and  the  prices  of  other  products. 

Since  corn  is  the  chief  feed  used  in  the  production  of  hogs,  it  would 
be  reasonable  to  expect  that  the  price  of  corn,  particularly  as  it  is  re- 
lated to  the  price  of  hogs,  also  would  have  considerable  bearing  on  the 
number  of  sows  the  farmer  would  be  inclined  to  breed  for  the  next 
year's  market.  If  the  price  of  hogs  is  high  in  relation  to  the  price  of 
corn,  then  feeding  the  corn  to  hogs  would  appear  more  profitable  than 
selling  it  as  grain,  and  the  farmer  likely  would  try  to  breed  more  sows 
to  take  advantage  of  the  favorable  situation.  If  the  other  way  around, 
then  he  would  be  inclined  to  go  less  heavily  into  hogs.  So  this  relation 
between  the  price  of  corn  and  the  price  of  hogs,  or  the  "corn-hog  ratio," 
we  shall  consider  to  be  one  of  the  first  factors  which  influences  the 
farmer's  inclination  to  breed  hogs. 

When  we  speak  of  the  corn-hog  ratio,  we  mean  the  total  number  of 
bushels  of  corn  required  to  equal  in  value  100  pounds  of  hogs.  This 
ratio  varies  from  time  to  time  because  the  prices  of  both  corn  and  hogs 
vary.  Obviously  when  corn  is  high  in  price  and  hogs  are  low,  not  so 
many  bushels  of  corn  will  be  required  to  equal  in  value  100  pounds  of 
hogs  as  when  corn  is  low  and  hogs  are  high.  Thus  in  July,  1924,  only 


516 


BULLETIN  No.  293 


[June , 


6.7  bushels  of  corn  were  required  to  equal  in  value  100  pounds  of  hogs, 
while  in  February,  1922,  16.5  bushels  were  required.  During  the  last 
twenty-five  years,  about  11.4  bushels  of  corn,  on  an  average,  have  been 
required  to  equal  in  value  100  pounds  of  live  hogs  in  the  Chicago  market. 
If  we  take  11.4  bushels  of  corn  as  the  normal  ratio  and  multiply  it 
by  the  price  of  corn  month  by  month  over  a  period  of  years,  and  com- 


1903 '04  '05   '06  '07    '08  '09  '10    'II     '\Z    '13    '14   '15    '16    '17    '18    '19   'ZQ  '21    'ZZ  'Z3   '24-  '25 


FIG.  7.— THE  CORN-HOG  RATIO  FROM  1903  TO  1925 

The  shaded  areas  above  the  heavy  horizontal  line  show  the  times  when  100 
pounds  of  heavy  hogs  were  worth  more  than  11.4  bushels  of  corn.  The  black  areas 
below  the  line  show  when  the  reverse  was  true  when  100  pounds  of  heavy  hogs  were 
worth  less  than  11.4  bushels  of  corn. 


pare  the  resulting  products  with  the  corresponding  monthly  prices  of 
hogs,  a  clear  picture  will  be  obtained  of  what  has  been  the  relationship 
between  them  for  a  period  of  years. 

Fig.  7  has  been  constructed  in  this  way.  The  shaded  areas  above  and 
below  the  heavy  horizontal  line  show  the  times  in  which  the  value  of 
100  pounds  of  hogs  has  been  higher  or  lower  than  the  value  of  11.4 
bushels  of  corn. 

Now  if  the  corn-hog  ratio  has  any  effect  upon  the  supply  of  hogs 
coming  to  market,  it  must  come  about  in  one  of  three  ways:  (1)  it  must 
cause  farmers  to  breed  either  more  or  fewer  sows ;  (2)  it  must  cause  them 
to  send  hogs  to  market  at  heavier  or  lighter  weights;  or  (3)  it  must  cause 
them  to  sell  bred  sows  before  they  farrow.  This  being  true  it  would  be 
reasonable  to  suppose  that  such  effect  as  the  ratio  did  have  would  be 


1927}  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  517 

exerted  around  the  time  of  breeding  or  during  the  time  the  hogs  are 
being  fed  out  and  marketed.  Since  in  this  connection  we  are  attempting 
to  measure  the  factors  influencing  the  number  of  hogs  coming  to  market 
rather  than  the  total  weight  of  live  hogs  received,  the  influence  which  the 
ratio  may  exert  upon  the  weight  of  hogs  marketed  may  be  disregarded 
here.1 

In  the  area  which  sends  hogs  to  the  Chicago  market,  there  is  a 
fairly  settled  policy  among  farmers  with  regard  to  the  time  at  which 
they  breed  their  sows  and  have  their  pigs  farrowed.  Most  of  the  "spring 
pig  crop"  with  which  we  are  primarily  concerned  here  is  farrowed  be- 
tween late  winter  and  early  summer,  the  majority  being  farrowed 
during  the  months  of  April  and  May.  Some  farmers  breed  their  sows 
early  in  November  in  order  to  have  the  pigs  farrowed  in  late  February 
or  March,  but  the  rank  and  file  usually  breed  in  December  and  January. 

Since  breeding  takes  place  usually  from  November  to  February, 
the  ratio  of  corn  to  hog  prices  around  that  time  would  be  expected  to 
have  a  greater  influence  upon  breeding  than  at  other  times  when  no  breed- 
ing is  done.  The  corn-hog  ratio  in  December,  therefore,  was  taken  as 
representative  of  the  relationship  between  corn  and  hog  prices  at  time 
of  breeding. 

The  average  corn-hog  ratio  from  January  to  March  was  used  to 
take  care  of  the  effect  which  the  ratio  might  have  upon  the  marketing 
of  bred  sows.  That  is  to  say,  the  corn-hog  ratio  at  breeding  tune  might 
be  such  as  to  induce  farmers  to  do  some  breeding,  yet  it  might  change 
subsequently  and  cause  them  to  sell  the  bred  sows.  For  much  the  same 
reason  the  average  relationship  between  corn  and  hog  prices  obtaining 
over  a  six-months  period  preceding  breeding,  that  is,  from  June  to 
November,  was  used.  Presumably  if  hog  production  has  been  pro- 
fitable for  a  considerable  time,  some  farmers  will  be  induced  to  go  into 
the  enterprise  more  heavily  because  of  that  fact.  Such  effect  as  this  has 
upon  stimulating  production  is  separate  and  in  addition  to  the  influence 
which  the  ratio  has  at  the  time  of  breeding. 

The  influence  of  corn-hog  ratios  taken  at  other  times  upon  receipts 
proved  of  little  or  no  significance,  except  in  the  case  of  the  influence  of 
the  corn-hog  ratios  in  May  and  June  upon  breeding  for  fall  litters. 

In  this  analysis  the  reader  should  bear  in  mind  that  the  relationship 
between  these  various  corn-hog  ratios  and  receipts  is  not  measured 


lThis,  however,  is  a  very  important  factor  and  must  be  given  full  weight  when 
attempting  to  measure  the  influence  of  the  supply  of  hogs  upon  price,  total  weight  in 
that  connection  being  more  important  than  total  numbers.  In  the  analysis  of  the 
factors  determining  the  price  pi  hogs  this  factor  of  weight  was  given  due  consider- 
ation, and  if  we  may  for  the  time  being  disregard  it,  we  can  consider  independently 
the  influence  which  the  corn-hog  ratio  around  time  of  breeding  has  on  the  number 
of  hogs  bred. 


518 


BULLETIN  No.  293 


[June, 


concurrently.  That  is,  it  is  not  the  relationship  between  the  December 
corn-hog  ratio,  for  example,  and  receipts  of  hogs  at  Chicago  in  December 
which  is  being  measured;  it  is  rather  the  relationship  between  the 
December  corn-hog  ratio  and  receipts  of  hogs  at  Chicago  starting  the 
next  September  and  running  thru  the  following  April.  In  other  words, 
there  is  what  is  termed  a  "time  lag"  between  the  ratio  and  receipts. 
Thus  the  December  corn-hog  ratio  in  1925  is  related  to  the  receipts 
of  hogs  at  Chicago,  not  in  December,  1925,  but  to  receipts  starting 
in  September,  1926,  and  running  thru  April,  1927,  giving  a  "time  lag" 
of  9  to  15  months  between  the  ratio  and  receipts.  Similarly  the  average 
corn-hog  ratio  from  June  to  November  is  related  to  receipts  of  hogs  at 
Chicago  12  to  18  months  later  and,  so  on  for  other  ratios. 

Effect  of  December  Corn-Hog  Ratio 

That  there  is  a  very  close  relationship  between  the  corn-hog  ratio 
in  December  and  the  receipts  of  hogs  at  Chicago  starting  the  next  Sep- 
tember and  running  thru  the  following  April,  is  shown  by  Table  1.  When 
the  price  of  hogs  is  high  in  comparison  with  the  price  of  corn  in  December, 
farmers  go  into  hog  production  more  heavily.  As  the  price  of  hogs 
becomes  increasingly  favorable,  farmers  tend  to  increase  their  produc- 
tion, but  the  increase  takes  place  in  a  diminishing  ratio;  that  is  to  say, 
a  10-percent  increase  in  the  corn-hog  ratio  above  normal  (11.4  bushels 
of  corn)  does  not  cause  a  10-percent  increase  in  the  production  of  hogs 
above  normal,  but  results  in  an  increase  considerably  less  than  this. 

The  same  facts  shown  in  Table  1  are  shown  graphically  in  Fig.  8. 
The  corn-hog  ratio  is  measured  on  the  vertical  scale  and  receipts  at 

TABLE  1. — NET  EFFECT  OF  THE  DECEMBER  CORN-HOG  RATIO  UPON  RECEIPTS  OF 
HOGS  AT  CHICAGO  NINE  TO  FIFTEEN  MONTHS  LATER1 


When  the  December 
corn-hog  ratio  was  — 

The  receipts  of  hogs  at  Chicago  9  to 
15  months  later  were  — 

25%  bel 
20% 
15% 
10% 
5% 
Normal 
5%a& 
10% 
15% 
20% 
25% 
30% 
35% 

tw  nor 

(11.4 

ve  nor 

mal  

15.12%  bel 
12.20% 
9.51% 
6.44% 
3.18% 
No  change 
2.68%  ab 
4.88% 
6.59% 
7.80% 
9.02% 
9.26% 
9.51% 

ow  rece 

or  eqi 
ve  rece 

ipts  o 

ailed 
pts  t 

f  prev 

receip 
e  pre 

ious  vea 

"  « 

« 
u 
ti 

;s  of  pre 

vious  ye 

t 

i 
< 
< 
< 
t 

r 

vious  year 
ar 

bu.)  

mal  

*The  influence  of  other  factors  upon  receipts  being  taken  account  of  and  allowed 
for,  the  table  shows  the  amount  of  change  in  receipts  which  was  due  to  given  changes 
in  the  December  corn-hog  ratio  alone. 


1927} 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


519 


CEM 

W 
O 


IME  OF  BREEDING 
T  OF  NORMAL 

l\> 
° 


— 
° 


IO  AT 
PERCE 


CO 
O 


70 


15* 


Receipts  Preceding  year 


s 


60        70        80         90       100       110        120       130       140       150       160       170       ISO 

RECEIPTS  OF  HOGS  AT  CHICAGO   IN  PER  CENT  OF  PRECEDING  YEAR 


FIG.  8. — NET  EFFECT  OF  DECEMBER  CORN-HOG  RATIO  UPON  RECEIPTS  AT  CHICAGO 

NINE  TO  FIFTEEN  MONTHS  LATER 

The  heavy  horizontal  line  represents  the  normal  corn-hog  ratio;  that  is,  the 
ratio  when  11.4  bushels  of  corn  equal  in  value  100  pounds  of  heavy  hogs.  The  heavy 
vertical  line  represents  the  receipts  of  the  previous  year,  these  being  taken  as  "nor- 
mal." The  arrows  pointing  vertically  indicate  the  extent  to  which  the  corn-hog  ratio 
varied  above  or  below  normal  at  December  breeding  time,  and  the  arrows  pointing 
to  the  right  or  the  left  represent  the  extent  to  which  receipts  9  to  15  months  later  were 
affected.  Thus  when  the  corn-hog  ratio  was  10  percent  above  normal,  the  receipts 
of  hogs  at  Chicago  9  to  15  months  later  were  4.88  percent  above  what  they  were  the 
preceding  year,  and  so  on  for  other  ratios.  These  facts  are  also  presented  in  Table  1. 


Chicago  on  the  horizontal  scale,  both  scales  being  on  a  percentage  basis. 
For  the  corn-hog  ratio  11.4  bushels  of  corn  have  been  taken  as  normal 
or  100,  and  for  receipts  those  of  the  preceding  year  are  considered  normal 
or  100.  These  "normal"  points  are  represented  by  the  heavy  black  lines 
which  intersect  near  the  center  of  the  chart.  Changes  either  in  the  corn- 
hog  ratio  or  in  receipts  are  then  measured  from  these  lines.  Thus  when 
the  chart  shows  an  increase  of  20  percent  in  the  corn-hog  ratio  above 
normal,  or  a  change  from  100  to  120  on  the  vertical  scale,  an  increase  of 
7.8  percent  is  shown  in  receipts  measured  on  the  horizontal  scale. 
Similarly  the  influence  which  any  other  change  in  the  corn-hog  ratio 
has  on  receipts,  may  be  ascertained  from  the  chart. 

The  December  corn-hog  ratio,  it  will  be  noted,  has  the  greatest  in- 
fluence on  receipts  when  it  is  between  25  percent  below  normal  and  15 
percent  above  normal.  When  the  corn-hog  ratio  is  very  high,  a  given 
percentage  change  from  normal  does  not  have  so  great  an  influence. 
This  is  indicated  by  the  tendency  of  the  curve  to  turn  up  sharply  in  the 
upper  range  and  to  be  more  nearly  vertical  than  horizontal. 


520 


BULLETIN  No.  293 


[June, 


This  slowing  up  in  production  (receipts)  as  the  corn-hog  ratio 
becomes  progressively  higher  probably  is  to  be  accounted  for  by  the 
fact  that  some  farmers  are  already  beginning  to  curtail  production 
thru  fear  of  overdoing  the  thing,  and  also  by  the  fact  that  when  pro- 
duction gets  higher  and  higher  it  becomes  increasingly  difficult  to  pro- 
duce more  hogs  owing  to  lack  of  equipment,  scarcity  of  feed,  and  also 
to  financial  limitations. 

Effect  of  June-November  Corn-Hog  Ratio 

The  relation  between  the  June-November  corn-hog  ratio  and 
receipts  of  hogs  at  Chicago  12  to  18  months  later  is  shown  in  Table  2 
and  Fig.  9. 


TABLE  2.  —  NET  EFFECT  WHICH  THE  AVERAGE  CORN-HOG  RATIO  FOR  Six  MONTHS 

PRECEDING  BREEDING  HAS  UPON  RECEIPTS  OF  HOGS  AT  CHICAGO  TWELVE 

TO  EIGHTEEN  MONTHS  LATER1 


When  the  average  corn-hog 
ratio  for  6  months  preceding 
breeding  (av.  June-Nov.) 


The  receipts  of  hogs  at  Chicago  12  to  18 
months  later  were — 


25%  below  normal. 

20% 

15% 

10% 


5% 
Normal 


(11.4 


bu.). 


5%  above  normal. 
10% 
15% 
20% 
25% 
30% 
35% 


24.51%  below  receipts  of  preceding  year 

19.12% 

13.73% 

8.83% 
3.68% 


No  change 


or  equalled 


3.19%  above  rece  pts  of  preceding  year 

5.63% 

8.09% 

9.80% 
11.03% 
12.25% 
12.74% 


receipts  of  previous  year 


influence  of  other  factors  upon  receipts  being  taken  account  of  and  allowed 
for,  the  table  shows  the  amount  of  change  in  receipts  which  was  due  to  given  changes 
in  the  average  corn-hog  ratio  during  the  six  months  preceding  breeding. 


It  will  be  noted  that  the  curve  in  Fig.  9  has  a  wider  swing  than  the 
curve  in  Fig.  8,  tho  it  has  the  same  general  shape.  This  means  that 
when  there  is  a  given  percentage  change  in  this  corn-hog  ratio  from 
normal  ("normal"  being  taken  to  mean  when  11.4  bushels  of  corn  are 
equivalent  in  price  to  100  pounds  of  heavy  hogs),  there  is  a  much  larger 
percentage  change  in  receipts  than  when  the  December  corn-hog  ratio 
changes.  In  fact,  when  the  June-November  ratio  increases  20  percent 
above  normal,  there  is  a  9.8  percent  increase  in  receipts,  while  when  the 
December  ratio  increases  similarly  there  is  only  a  7.8-percent  increase  in 
receipts. 


1927\ 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


521 


Another  fact  of  interest  in  these  two  charts  is  that  when  the  curves 
go  below  the  line  of  normal  ratio  they  turn  more  sharply  to  the  left  than 
they  do  to  the  right  when  above  the  normal  ratio,  indicating  that  when 
the  ratio  is  low,  an  increase  in  it  results  in  a  much  larger  percentage  in- 
crease in  receipts  than  when  the  ratio  is  high.  For  example,  in  Fig.  9 
an  increase  of  10  percent  in  the  ratio  when  it  is  low  results  in  an  in- 


140 


52 

HQ    130 


120 


<ouj    no 


100 


90 


05    80 


70 


Rece/pts  pre ceding  year 


II.  *  Bushels  of  Com 


60          70         80          90         100        HO        120        130       KO        150       160        170        180 

RECEIPTS  OF   HOGS    AT   CHICAGO  IN  PER  CENT  OF  PRECEDING  YEAR 

FIG.  9. — NET  EFFECT  OF  AVERAGE  CORN-HOG  RATIO  FOR  Six  MONTHS  PRECEDING 
BREEDING  UPON  RECEIPTS  OF  HOGS  AT  CHICAGO  TWELVE  TO  EIGHTEEN 

MONTHS  LATER 

This  chart  is  read  in  the  same  way  as  Fig.  8.  When  the  corn-hog  ratio  was  10 
percent  above  normal  the  receipts  12  to  18  months  later  were  5.63  percent  above  nor- 
mal. A  change  to  35  percent  above  normal  resulted  in  an  increase  of  12.74  percent 
in  receipts;  a  drop  to  25  percent  below  normal  resulted  in  a  24.51  percent  decrease 
in  receipts.  See  Table  2  for  further  ratio  changes  and  their  effects. 

crease  of  8.83  percent  in  receipts.  When  the  ratio  is  very  high,  however, 
an  increase  of  10  percent  results  in  an  increase  in  receipts  of  only  5.63 
percent.  Which  means  that  when  the  corn-hog  ratio  is  low,  any  upward 
change  making  the  ratio  more  favorable  to  hogs  is  met  by  a  very  decided 
response  on  the  part  of  farmers  in  increasing  their  production  of  hogs; 
and  that  when  the  ratio  is  already  high,  any  further  upward  change 
results  in  relatively  less  response  in  production.  In  the  one  case  it  may 
be  said  that  the  response  is  very  "elastic,"  in  the  other  that  it  is  relatively 
"inelastic." 

Effect  of  January-March  Corn-Hog  Ratio 

A  third  corn-hog  ratio  which  was  found  to  be  closely  related  to  re- 
ceipts of  hogs  is  that  covering  the  period  from  January  to  March  follow- 


522 


BULLETIN  No.  293 


[June, 


ing  the  usual  breeding  date  around  December  1  (Table  3  and  Fig.  10). 
The  curve  in  Fig.  10,  it  will  be  noted,  swings  to  the  opposite  sides 
of  the  normal  lines  from  the  curves  shown  in  Figs.  8  and  9,  indicating 
that  when  the  corn-hog  ratio  rises  during  this  period  following  breeding, 
receipts  6  to  12  months  later  decrease;  and  when  the  ratio  drops,  re- 
ceipts 6  to  12  months  later  increase.  After  sows  are  bred  in  December 
it  is  not  an  uncommon  practice  for  farmers  to  ship  them  to  market  be- 
fore they  farrow  in  the  spring.  When  there  is  a  change  in  the  relation- 
ship between  corn  and  hog  prices  after  the  sows  are  bred,  making  the 


TABLE  3. — NET  EFFECT  WHICH  THE  AVERAGE  CORN-HOG  RATIO  FOR  THREE 

MONTHS  FOLLOWING  BREEDING  HAS  UPON  RECEIPTS  OF  HOGS  AT 

CHICAGO  Six  TO  TWELVE  MONTHS  LATER1 


When  the  average  corn-hog 

ratio  for  3  months  following 

breeding  (av.  Jan.-March) 


The  receipts  of  hogs  at  Chicago  6  to 
12  months  later  were — 


25%  below  normal. 

20% 

15% 

10% 


5% 
Normal 


(11.4 


bu.). 


5%  above  normal. 
10% 
15% 
20% 
25% 
30% 
35% 


10.94%  above  receipts  of  preceding  year 
7.46% 
4.23% 

1.74% 
.49% 


No  change 


or  equalled 


.50%  below  rece  pts  of  preceding  year 

.50% 

.75% 
1.00% 
1.25% 
1.50% 
1.50% 


receipt 


s  of  preceding  year 


influence  of  other  factors  upon  receipts  being  taken  account  of  and  allowed 
for,  the  table  shows  the  amount  of  change  in  receipts  which  was  due  to  given  changes 
in  the  average  corn-hog  ratio  for  the  three  months  following  breeding. 


ratio  more  favorable  to  corn  and  less  favorable  to  hogs,  then  farmers 
are  more  likely  to  sell  the  bred  sows  and  have  fewer  hogs  to  send  to 
market  later.  On  the  other  hand,  an  increase  in  the  corn-hog  ratio  may 
cause  farmers  to  hold  on  to  their  sows  longer,  or  even  to  keep  back  ad- 
ditional sows  for  late  breeding,  and  this  fact  is  reflected  in  higher  re- 
ceipts.1 


'In  this  analysis  the  effect  of  this  ratio  upon  receipts  was  directly  opposed  to  this 
and  hence  contrary  to  theoretical  expectations. 

In  Tables  3,  5,  and  6  in  the  Statistical  Appendix  it  will  be  noted  that  there  is 
very  high  intercorrelation  between  this  factor  and  the  other  factors  used.  This  being 
true,  the  direct  determination  of  this  factor  upon  receipts,  tho  in  itself  positive, 
becomes  negative  in  the  presence  of  the  other  factors  whose  joint  determination 
overshadows  it.  (See  Statistical  Appendix,  page  557.) 


1927] 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


523 


At  its  greatest,  however,  the  effect  of  the  corn-hog  ratio  for  the  three 
months  following  December,  when  the  ratio  is  above  normal,  is  practical- 
ly negligible.  About  the  only  influence  which  this  ratio  has  upon  re- 


130 


110 


100 


15     90 


80 


70 


ushels  of  Cor, 


Receipts  Preceding  Yea, 


35%, 


50         60         70         80         90        100        110         120        130       140        ISO 

RECEIPTS  'OF    HOGS   AT    CHICAGO  IN    PER  CENT  OF  PRECEDING  YEAR 


160 


FIG.  10.  —  NET  EFFECT  OF  CORN-HOG  RATIO  FOR  THREE  MONTHS  AFTER  BREEDING 

UPON  RECEIPTS  AT  CHICAGO  Six  TO  TWELVE  MONTHS  LATER 
When  the  average  January  to  March  ratio  was  35  percent  above  normal,  receipts 
of  hogs  at  Chicago  changed  only  1.5  percent  from  normal.   When  the  ratio  is  10  per- 
cent below  normal,  however,  receipts  increase.    This  increase  amounts  to  almost 
11  percent  when  the  ratio  is  25  percent  below  normal. 


ceipts  occurs  when  hog  prices  are  low  in  comparison  to  corn  prices;  then 
it  is  appreciable. 

Effect  of  All  Three  Corn-Hog  Ratios 

Over  an  eighteen-year  pre-war  period,  from  1898  to  1916,  it  was 
possible  to  account  for  a  little  more  than  70  percent  of  the  variation  in 
receipts  of  hogs  at  Chicago  by  means  of  these  three  corn-hog  ratios 
"lagged"  as  indicated.1  This  is  brought  out  in  Table  4  and  Fig.  11. 

Hog-Steer  Ratio  a  Minor  Factor 

The  Illinois  farmer,  particularly  in  the  livestock  section  west  of  the 
Illinois  river,  has  many  opportunities  of  production  open  to  him.  He 
may  feed  corn  to  hogs,  feed  it  to  beef  cattle  (or  to  sheep),  or  sell  the  corn 
direct  as  grain.  The  way  in  which  he  will  dispose  of  it  will  be  determined 
by  what  he  considers  is  the  most  profitable  of  the  different  enterprises. 

JA  detailed  discussion  of  the  method  used  and  the  theoretical  background  for 
the  conclusions  drawn  here  will  be  found  in  the  Statistical  Appendix. 


524 


BULLETIN  No.  293 


[June, 


TABLE  4. — NET  EFFECT  WHICH  THE  COMBINED  CORN-HOG  RATIOS  HAVE  UPON 
RECEIPTS  OF  HOGS  AT  CHICAGO  Six  TO  EIGHTEEN  MONTHS  LATER1 


When  the  corn-hog 
ratio  was  — 

The  receipts  of  hogs  at  Chicago  6  to  18 
months  later  were  — 

25%  bel 
20% 
15% 
10% 
5% 
Normal 
5%  a!b( 
10% 
15% 
20% 
25% 
30% 
35% 

ow  noi 

| 
I 

(11.4 
we  noi 

i 

i 

i 
< 

"mal  

9.67%  bel 
8.02% 
6.40% 
4.48% 
2.12% 
No  change 
1.81%  06 
3.39% 
4.67% 
5.55% 
6.34% 
6.73% 
6.98% 

ow  receipts  of  preceding  ye 

«        «<          «          « 

«        «          «          « 
«        a          «          « 
«        «          «          « 

or  equalled  receipts  of  pre 

ve  receipts  of  preceding  yes 

a         it          it          t 

«            «              a              « 
a            «               «              « 
(i            «              «              ( 
«            «              <(              ( 
«            «               «              ( 

ar 

ceding  year 
ir 

< 

< 

« 

< 

bu.)  

mal  

c 

( 

< 

( 

( 

1 

JThe  three  corn-hog  ratios,  (1)  in  December  at  time  of  breeding,  (2)  the  average 
for  the  six  months  (June-November)  preceding  breeding,  and  (3)  the  average  for  the 
three  months  (January-March)  following  breeding,  have  been  combined  into  one 
ratio  according  to  the  net  effect  of  each  upon  receipts. 


COMBINED  CORN-HOG  RATIO  IN  PER  CENT  OF  NORMAL 

;»  OD  <O  O"  —  f\>  ^3  ] 
300000QC 

6.98% 

Receipts 

Preced/ 

•iff  year 
20% 

S55W 

1 
10% 

%  / 
3.391 

t 

/ 

sNorr 

lol  11.4-B 

ushels  o 

'Corn 

I5*^x.     / 

25%        /  
MAOV 

a67%" 

60         70         80         90        100        110         120       130        140        150       160       170       180 
RECEIPTS  OF  HOGS  AT  CHICAGO  IN  PER  CENT  OF  PRECEDING  YEAR 

FIG.  11. — NET  EFFECT  OF  ALL  THREE  CORN-HOG  RATIOS  UPON  RECEIPTS  OF  HOGS 

AT  CHICAGO  Six  TO  EIGHTEEN  MONTHS  LATER 

The  three  ratios,  (1)  in  December  at  time  of  breeding,  (2)  for  six  months  pre- 
ceding breeding,  and  (3)  for  three  months  after  breeding,  account  for  more  than 
70  percent  of  the  variation  in  receipts  at  the  Chicago  market.  When  the  combined 
ratios  stand  at  a  height  of  35  percent  above  normal,  receipts  6  to  18  months  later 
increase  about  7  percent;  when  at  a  level  of  25  percent  below  normal,  receipts  for 
the  same  period  decline  almost  10  percent  (9.67  percent). 


This  does  not  mean  necessarily  that  he  will  feed  all  of  his  corn  to 
hogs,  or  all  to  beef  cattle,  nor  yet  sell  it  all  as  grain.  He  may  utilize  it  in 


1927}       .  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  525 

all  three  ways,  or  he  may  feed  part  to  hogs  and  plan  on  selling  some  of  it, 
or  he  may  feed  both  hogs  and  cattle  or  even  buy  additional  corn.  Just 
what  he  will  do  in  any  particular  year  will  be  determined  by  the  outlook 
for  profitable  returns  in  each  of  the  alternatives  open  to  him.  If  there  is 
a  good  prospect  for  the  price  of  hogs  to  be  high,  and  the  price  of  cattle 
and  corn  to  be  low,  he  will  probably  go  into  hog  production  more 
heavily  and  reduce  his  cattle-feeding  operations  somewhat.  Or,  on  the 
other  hand,  if  the  price  of  cattle  promises  to  be  relatively  higher  than  the 
price  of  hogs,  he  may  go  into  cattle  a  little  more  strongly  and  hogs  some- 
what less.  Whichever  course  he  pursues  will  be  reflected  in  the  supply 
of  hogs  as  well  as  of  cattle. 

So  the  relation  which  hog  prices  bear  to  cattle  prices  preceding  and 
at  the  time  the  farmer  begins  to  breed  his  sows  is  a  factor  which  may 
influence  his  breeding  operations.  In  this  study  this  factor  was  found  to 
be  of  relatively  small  importance  in  explaining  fluctuations  in  hog 
receipts,  tho  it  is  of  sufficient  importance  to  merit  consideration. 


FACTORS  THAT  LIMIT  A  FARMER'S  ABILITY  TO  PRODUCE  HOGS 
Lack  of  Breeding  Stock,  Capital,  Equipment 

Ordinarily  the  Illinois  farmer  has  little  difficulty  in  increasing  or 
decreasing  his  production  of  hogs  whenever  and  however  he  desires. 
There  are  two  factors,  however,  which  possibly  may  limit  his  actions. 
They  are:  (1)  lack  of  breeding  stock  at  time  of  breeding,  and  (2)  lack  of 
capital  and  equipment  and  facilities  for  handling  hogs.  Neither  of  these 
factors  in  general  is  of  very  great  significance,  yet  at  certain  times 
either  one  may  be  of  enough  importance  to  cause  some  limitation  in 
production. 

It  usually  is  very  easy  to  get  in  and  out  of  hog  production;  com- 
paratively little  capital  or  equipment  is  necessary,  particularly  for  spring 
and  summer  pigs,  and  usually  breeding  stock  (sows)  can  be  obtained  at 
low  cost.  When  a  farmer  desires  to  increase  his  production,  he  will 
simply  keep  out  some  of  his  best  gilts  and  breed  them.  Of  course  if 
going  into  hog  production  means  buying  both  breeding  stock  and  feed, 
then  lack  of  capital  may  be  a  very  limiting  factor,  but  this  situation  rare- 
ly obtains  on  the  corn-belt  farm. 

There  may  come  times,  however,  when  the  lack  of  breeding  stock 
may  prevent  farmers  from  going  into  hog  production  as  heavily  as  they 
otherwise  would.  Such  a  situation  is  likely  to  obtain  immediately  after 
a  serious  epidemic  of  hog  cholera.  While  vaccination  keeps  these 
cholera  epidemics  in  check  fairly  well,  occasionally  they  get  out  of 


526  BULLETIN  No.  293  [June, 

control  and  cause  big  losses.  Oftentimes  whole  herds  are  wiped  out 
almost  completely.  It  is  under  circumstances  such  as  these  that  there 
may  develop  a  serious  shortage  in  breeding  stock  which  is  very  likely 
to  result  in  lower  receipts  the  following  year. 

There  is  still  another  way  in  which  a  shortage  in  breeding  stock 
may  limit  the  extent  to  which  certain  farmers  can  go  into  hog  produc- 
tion. It  is  felt  mainly  by  those  farmers  who  ordinarily  sell  grain  instead 
of  feeding  it.  In  years  in  which  corn  prices  are  low,  these  farmers  being 
desirous  of  realizing  as  much  from  their  corn  crop  as  possible  likely  will 
attempt  to  feed  some  of  it  to  hogs.  Since  hog  production  is  not  a  common 
practice  with  them,  they  will  have  to  "buy  in."  That  is,  they  either 
will  have  to  buy  breeding  stock  or  buy  feeder  hogs.  It  usually  happens 
in  a  situation  like  this  that  farmers  everywhere  feel  the  desire  to  go  into 
hogs  somewhat  more  heavily,  and  the  demand  for  breeding  stock  in- 
creases. Of  course  the  hog  producer  will  supply  his  own  needs  first, 
and  farmers  wishing  to  buy  breeding  stock  will  have  to  be  satisfied 
with  what  remains.  It  is  not  unusual  in  these  circumstances  for  a 
shortage  in  breeding  stock  to  develop.  If  a  shortage  does  materialize, 
it  means  that  many  farmers  wrill  not  go  so  heavily  into  hog  production 
as  they  otherwise  would  have  done;  hence  the  supply  of  hogs  the  follow- 
ing year  will  not  be  so  large. 

FACTORS  THAT  WORK  AGAINST  A  FARMER'S  EFFORTS  IN 
HOG  PRODUCTION 

Weather  Conditions  at  Farrowing  Time 

In  addition  to  the  groups  of  factors  that  have  to  do  with  a  farmer's 
inclination  and  ability  to  produce  hogs,  there  is  a  third  group  which 
tends  to  work  against  his  efforts.  These  are  unfavorable  wreather  condi- 
tions at  farrowing  time  and  the  presence  of  disease  and  parasites.  Farm- 
ers may  be  desirous  of  going  into  hog  production  very  heavily  and  may 
breed  a  large  number  of  sows  for  that  purpose,  yet  their  efforts  maybe 
materially  thwarted  by  heavy  pig  losses  at  farrowing  time  resulting 
from  unfavorable  climatic  conditions.  Of  course  farmers  can  control 
these  conditions  in  a  measure  by  providing  comfortable  quarters  and  by 
giving  excellent  care  and  attention  to  sows  and  pigs,  yet  some  loss  will 
result  in  spite  of  the  best  of  care.  While  the  better  farmers  will  keep  their 
pig  losses  down,  the  majority  of  hogs  are  produced  under  conditions  in 
which  the  best  methods  of  production  and  sanitation  are  not  practiced; 
hence  the  pig  loss  likely  will  be  much  greater  in  unfavorable  weather. 

In  order  to  measure  the  influence  of  climatic  conditions  at  farrowing 
time  upon  pig  loss,  and  consequently  upon  subsequent  receipts  of 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


527 


hogs  at  Chicago,  an  index  of  climate  or  some  other  factor  capable  of 
statistical  measurement  had  to  be  constructed.  What  should  such  an 
index  include  or,  in  other  words,  what  are  the  climatic  conditions  at 
farrowing  time  which  are  likely  to  result  in  heavy  pig  losses?1  Three 


RECEIPTS  OF  HOGS  AT  CHICAGO 
IN  PER  CENT  OF  PRECEDING  YEAR 

-j  os  to  O  rv)  <*)  j 

OOOOOc>oc 

<n 

A 

30% 

/ 

: 

n». 

/ 

^ 

> 

I6.*6% 

aeer. 

t 

/Receipt 

s  precec 

ing  yeoi 

a. 

>8%i  

—  —  ^— 

_—  —  -— 

35% 

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•x  o/'  C//> 
ectiny  Y 

•note 
?ar 

0        70         80        90        100       110       120       130       140        150        160        170        18 

INDEX  OF  CLIMATE  IN  PERCENT  OF  PRECEDING  YEAR 

FIG.  12. — EFFECT  OF  CLIMATIC  CONDITIONS  AT  FARROWING  TIME  UPON  RECEIPTS 

OF  HOGS  AT  CHICAGO  Six  TO  TWELVE  MONTHS  LATER 

Normal  climate  is  represented  by  the  heavy  vertical  line  in  the  chart  and  norma 
receipts  of  preceding  year  by  the  heavy  horizontal  line,  while  changes  in  receipts  re- 
sulting from  changes  in  climate  are  shown  by  the  curve.  Thus  when  climatic  con- 
ditions are  below  normal,  receipts  fall  off,  as  shown  by  the  way  the  curve  drops  down; 
and  when  above  normal,  receipts  increase,  as  indicated  by  the  rapid  rise  of  the  curve. 
A  20-percent  rise  in  climatic  conditions  above  normal  brought  8.86  percent  more  hogs 
to  market  6  to  12  months  later.  A  rise  of  30  percent  in  climatic  conditions  above 
normal  brought  16.46  percent  more  hogs  to  market.  (See  also  Table  4). 

factors  were  found  to  be  of  most  importance :  departure  of  temperature 
from  normal,  amount  of  precipitation  (number  of  rainy  days),  and 
number  of  sudden  changes  in  temperature.  That  is  to  say,  years  when  a 
large  amount  of  rain  accompanied  by  temperatures  below  normal  and  a 
large  number  of  sudden  changes  in  temperature  occur,  pig  losses  likely 
will  be  heavier  than  they  will  be  when  these  conditions  do  not  obtain. 
(See  Fig.  12.) 

Disease 

This  factor  needs  but  little  discussion.  Its  influence  is  self-evident. 
The  more  disease  there  is  the  greater  will  be  the  death  loss,  and  the 
greater  the  death  loss  the  greater  the  influence  upon  receipts.  This  factor 
can  be  controlled  to  a  considerable  degree  by  the  farmer  if  he  will  take 

JSee  Statistical  Appendix  for  discussion  of  this  index. 


528 


BULLETIN  No.  293 


[June, 


proper  precautions  and  follow  sensible  and  sanitary  practices  for  con- 
trolling cholera,  worms,  and  other  diseases  and  parasites. 

The  Upward  Trend  in  Production 

During  the  eighteen  years  covered  by  this  study  there  was  an  up- 
ward trend  in  the  production  of  hogs.  Receipts  at  Chicago  from  Septem- 
ber to  April  of  each  year  during  this  period  increased  at  the  rate  of  a  little 
more  than  one-half  of  1  percent  (.65  percent)  per  year.  This  increase 
over  a  long  period  of  time  is  separate  and  distinct  from  increases  due  to 
the  other  factors  we  have  discussed  and  must  be  so  treated.  It  is  an 
especially  important  factor  to  consider  when  attempting  to  explain 
differences  in  receipts  over  a  period  of  years  or  in  attempting  to  estimate 


FIG.  13. — INCREASES  IN  RECEIPTS  AT  CHICAGO  FROM  1898 
TO  1915  DUE  TO  THE  UPWARD  TREND  IN 

PRODUCTION 

This  upward  tendency  in  production  is  largely  due  to 
increases  in  population.  For  the  period  shown  it  amounted 
to  a  little  more  than  %  of  1  percent  (.65  percent)  a  year. 

what  receipts  will  be  in  the  future.  Unless  this  upward  tendency  or 
growth  in  receipts  due  to  the  increase  in  population  and  other  basic 
factors  is  taken  into  consideration,  the  estimate  of  receipts  made  from 
current  factors  will  be  too  low.  Fig.  13  shows  the  increase  in  receipts 
at  Chicago  which  has  resulted  from  this  upward  trend  of  production 
alone,  the  influence  of  other  factors  upon  receipts  having  been  taken 
into  account  and  eliminated. 

Relative  Importance  of  Various  Supply  Factors 

As  has  already  been  pointed  out,  a  little  more  than  70  percent  of 
the  variation  in  receipts  of  hogs  at  Chicago  for  the  period  from  1897  to 


1927]  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  529 

1914  can  be  accounted  for  by  the  effects  of  three  corn-hog  ratios.  Farm- 
ers apparently  are  influenced  in  their  breeding  operations  more  by  the 
relation  between  corn  and  hog  prices  than  by  any  other  one  thing.  The 
relation  in  December  at  the  time  of  breeding  for  spring  litters  and  during 
the  six  months  preceding  breeding  appear  to  have  the  greatest  influence 
upon  breeding  operations.  Climatic  conditions  at  farrowing  time 
are  the  next  most  important  factor  influencing  receipts,  this  factor  ac- 
counting for  about  18  percent  of  the  variation  shown  in  the  present 
analysis. 

The  relation  between  hog  and  steer  prices,  size  of  the  corn  crop  or 
percentage  of  non-merchantable  corn,  number  of  sows  available  for 
breeding  stock,  etc.,  are  of  minor  importance  so  far  as  this  analysis 
indicated.  While  there  was  found  to  be  some  relationship  between  each 
of  these  factors  and  receipts,  it  was  of  negligible  significance  as  com- 
pared with  the  important  influence  of  the  corn-hog  ratios  and  climatic 
conditions  at  farrowing  time. 

That  the  factors  which  we  have  been  discussing  are  the  funda- 
mental determinants  of  supply  can  hardly  be  doubted.  The. high  corre- 
lation1 between  them  and  receipts  (which  are  the  measure  of  supply) 
in  the  Chicago  market  over  a  period  of  years  indicates  that  this  is  true. 
Since  the  major  portion  of  the  hogs  (90  percent  or  more)  which  come  to 
Chicago  are  produced  in  Iowa,  Illinois,  Wisconsin,  and  Minnesota, 
these  factors  may  be  considered  the  chief  determinants  of  supply  over 
that  whole  area. 


PART  III 

RESPONSE  OF  HOG  PRODUCERS  IN  DIFFERENT  SECTIONS 
OF  ILLINOIS  TO  CORN-HOG  RATIO 

It  does  not  follow  necessarily  from  the  foregoing  that  all  farmers 
respond  in  the  same  way  to  given  changes  in  the  various  factors  affecting 
hog  production.  .  The  conditions  under  which  production  takes  place 
vary  from  area  to  area.  Farmers  vary  widely  also  in  resources  and 
opportunities.  For  these  and  other  reasons  they  do  not  increase  and  de- 
crease their  production  of  hogs  in  the  same  way  or  to  the  same  extent 
from  year  to  year. 


XA  coefficient  of  multiple  correlation  of  .983  was  obtained.  Such  a  coefficient 
shows  the  degree  of  relationship  between  a  particular  resultant  and  certain  "causal" 
factors  related  to  it  (a  coefficient  of  1.0  means  perfect  correlation,  or  complete  deter- 
mination). See  Statistical  Appendix  for  detailed  discussion  of  method  of  compu- 
tation. 


530 


BULLETIN  No.  293 


[June, 


How  farmers  in  different  sections  of  Illinois  have  responded  to 
changes  in  the  corn-hog  ratio  is  indicated  in  Table  5.  The  influence'  of 
other  factors  upon  production  having  been  taken  into  account  and  al- 


TABLE  5. — NET  EFFECT  OF  VARIOUS  CORN-HOG  RATIOS1  UPON  PRODUCTION  OF 
HOGS  IN  DIFFERENT  TYPE-OF-FARMING  AREAS  IN  ILLINOIS 


When  corn-hog  ratio  is  — 

Hog  production,  in  percentage  of  previous  year, 
has  been  — 

In 

In  percentage 

In  the  grain 

In  the  live- 

In the  wheat 

In  the  dairy 

actual 

of  normal 

section,  east 

stock  section 

section,  south 

section 

bushels 

ratio  (11.4 

central 

western 

western 

northern 

of  corn 

bu.) 

Illinois 

Illinois 

Illinois 

Illinois 

bu. 

perct. 

perct. 

perct. 

perct. 

perct. 

7.98 

70 

88.78 

97.02 

96.90 

95.19 

8.55 

75 

90.33 

97.57 

97.28 

95.88 

9.12 

80 

92.21 

98.07 

97.72 

96.62 

9.69 

85 

93.92 

98.29 

98.21 

97.41 

10.26 

90 

95.58 

98.56 

98.64 

98.15 

10.83 

95 

97.62 

99.17 

99.34 

98.99 

11.40 

100 

100.00 

100.00 

100.00 

100.00 

11.97 

105 

102.26 

100.88 

101  .  09 

101.54 

12.54 

110 

104.53 

102.04 

102.72 

102.85 

13.11 

115 

107.18 

103.76 

104.62 

104.28 

13.68 

120 

109.94 

105.47 

106.63 

105.76 

14.25 

125 

112.43 

108.07 

108.86 

106.40 

14.82 

130 

115.47 

110.61 

111.30 

107.09 

15.39 

135 

118.18 

113.20 

114.40 

108.15 

15.96 

140 

121.27 

115.52 

118.21 

109.20 

:The  corn-hog  ratios  "lagged"  at  different  periods  have  been  combined  into  one 
ratio  according  to  the  net  effect  of  each  upon  the  production  of  hogs  as  indicated  by 
receipts  at  the  Chicago  market  6  to  18  months  later. 

The  data  from  which  this  table  was  made  were  obtained  by  running  numerous 
multiple  correlation  analyses  between  the  number  of  hogs  on  farms  from  year  to 
year  in  each  type-of-f arming  area  and  the  corn-hog  ratio  (with  various  lags),  the 
hog-steer  ratio,  size  of  corn  crop,  trend,  etc.  (see  Statistical  Appendix  for  detailed 
discussion) .  The  corn-hog  ratio  (with  various  lags)  proved  to  be  the  most  important 
factor  influencing  production  and  has  been  used  here  for  that  reason. 


lowed  for,  the  table  indicates  the  amount  of  change  in  production  which 
has  accompanied  a  given  change  in  the  corn-hog  ratio. 

GRAIN  SECTION,  EAST-CENTRAL  ILLINOIS 

In  east-central  Illinois,  it  will  be  noted,  a  given  change  in  the 
corn-hog  ratio  has  resulted  in  a  larger  percentage  change  in  production 
than  in  other  sections  of  the  state;  that  is  to  say,  farmers  in  east-central 
Illinois  have  varied  their  production  of  hogs  much  more  widely  from  year 
to  year  than  have  farmers  in  other  sections  of  the  state.  In  this  section 


1927} 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


531 


grain  production  is  the  predominant  type  of  farming.  Corn  and  oats 
are  the  leading  cereals.  While  there  are  a  large  number  of  farmers  who 
grow  and  fatten  hogs  for  the  market,  the  majority  of  them  ordinarily 
sell  the  corn  and  oats  as  grain  instead  of  feeding  it.  Yet  when  the  price 
of  corn  is  very  low  in  comparison  with  the  price  of  hogs,  many  farmers 


70        80 


90         100       110         120        130       140        ISO 
PRODUCTION  IN  PERCENT  OF  PRECEDING  YEAR 


160 


170        180 


FIG.  14. — NET  EFFECT  OF  THREE  CORN-HOG  RATIOS  COMBINED  UPON  PRODUCTION 

OF  HOGS  IN  DIFFERENT  TYPE-OF-FARMING  AREAS  IN  ILLINOIS 
This  chart  is  read  in  the  same  way  as  Figs.  9  to  12  except  that  there  are  four 
curves  to  be  taken  into  consideration  instead  of  one,  the  different  curves  representing 
different  areas  of  the  state.  It  is  in  the  grain  section  of  east-central  Illinois  that  the 
greatest  proportional  change  in  hog  production  occurs  with  a  change  in  the  corn-hog 
ratio.  This  is  indicated  by  the  fact  that  the  curve  for  this  area  moves  away  from  the 
perpendicular  line  at  a  greater  angle  than  does  the  curve  for  any  other  section.  The 
less  the  effect,  the  closer  the  curve  comes  to  the  perpendicular. 


who  do  not  ordinarily  raise  hogs  will  go  into  hog  production  in  an 
endeavor  to  realize  as  much  from  the  corn  crop  as  possible.  When  the 
situation  changes  and  the  price  of  corn  again  becomes  high  in  comparison 
with  the  price  of  hogs,  they  will  cut  down  their  production  of  hogs  very 
rapidly,  go  out  of  the  enterprise  almost  completely,  and  sell  corn  instead 
of  feeding  it.  This  is  indicated  very  clearly  in  the  curve  in  Fig.  14,  which 
ascends  and  descends  much  less  steeply  than  the  curves  showing  changes 
in  production  in  the  other  areas. 

LIVESTOCK  SECTION,  WESTERN  ILLINOIS 

In  western  Illinois,  in  the  area  west  of  the  Illinois  river,  corn  is 
again  the  leading  cereal,  yet  the  major  portion  of  it  is  fed  and  sold  in  the 


532  BULLETIN  No.  293  [June, 

form  of  meat  rather  than  as  grain.  When  hog  prices  are  high,  farmers 
increase  their  production  of  hogs  considerably  but  their  percentage 
increase  is  not  so  great  as  in  east-central  Illinois.  When  hog  prices  are 
low  in  comparison  with  corn  prices,  they  reduce  hog  production  some- 
what but  do  not  go  out  of  the  enterprise  so  rapidly  as  do  the  farmers  in 
east-central  Illinois.  This  is  indicated  in  Fig.  14  by  the  curve  for  west- 
ern Illinois  tending  toward  the  perpendicular  in  the  lower  range. 

In  this  section  cattle  feeding  is  practiced  rather  widely,  much  of 
the  corn  crop  being  utilized  in  this  way.  Cattle  feeding  thus  competes 
with  hog  production  in  the  utilization  of  the  corn  crop.  In  case  the  out- 
look for  cattle  prices  is  favorable,  farmers  are  likely  to  feed  more  cattle 
and  not  so  many  hogs.  Yet  even  if  hog  prices  become  very  unfavorable, 
they  will  not  give  up  the  enterprise  completely.  In  this  section  it  is  a 
common  practice  to  keep  a  few  hogs  to  run  with  the  cattle  in  order  to 
utilize  waste  and  undigested  grain,  and  this  partially  explains  why  pro- 
duction is  less  elastic  when  the  corn-hog  ratio  is  low  than  when  it  is  high, 
that  is,  why  even  tho  prices  are  unfavorable  for  hogs,  these  farmers  do 
not  stop  growing  them. 

WHEAT  AND  DAIRY  SECTIONS 

In  southwestern  Illinois  hog  production  is  not  commercialized  to  the 
same  extent  as  in  some  of  the  other  sections;  that  is,  farmers  are  not  in 
hog  production  so  heavily.  They  keep  about  the  same  number  of  hogs 
from  year  to  year,  yet  increase  their  production  somewhat  when  prices 
become  very  favorable.  The  same  is  true  of  hog  production  in  the  dairy 
section  around  Chicago. 

Thus  farmers  in  different  sections  of  the  state  vary  their  hog  pro- 
duction from  year  to  year  according  to  their  own  particular  situations. 
They  engage  in  those  lines  of  production  which  seem  to  them  most 
profitable  or  to  fit  in  best  with  their  sectional  advantages  and  limita- 
tions, their  organization,  equipment,  and  financial  circumstances. 
Of  course  not  all  farmers  interpret  a  given  situation  in  the  same  way. 
To  some  farmers  the  outlook  for  hog  prices  may  appear  very  favorable 
at  a  particular  time,  while  to  other  farmers  it  may  not  appear  favorable 
at  all.  One  group  may  be  considering  the  immediate  price  situation  at 
the  time  of  breeding,  while  another  group  is  looking  to  the  future,  to 
what  the  situation  will  be  when  the  pigs  are  grown  and  come  to  market. 
These  different  responses  result  in  wide  fluctuations  in  production  and 
account  for  the  periodic  shifting  up  and  down  not  only  of  the  supply 
of  hogs  but  of  the  price  also. 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  533 

PART  IV 
ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 

The  fact  that  there  is  a  periodic  shifting  up  and  down  in  the  supply 
and  price  of  hogs  about  every  15  to  18  months  indicates  that  the  ma- 
jority of  farmers  respond  to  current  market  conditions  rather  than  to 
those  that  are  likely  to  prevail  when  their  hogs  are  ready  for  market. 

Not  all  farmers,  however,  produce  hogs  in  such  a  blind  and  hap- 
hazard way.  In  fact  the  thinking  farmer  adjusts  his  production  so  as  to 
take  advantage  of  the  mistakes  of  his  less  alert  neighbors.  Instead  of 
going  into  hog  production  when  the  immediate  situation  is  favorable, 
he  holds  off  fearing  overproduction  and  gets  in  at  a  more  strategic  time 
later  when  large  numbers  of  farmers  are  going  out  of  production. 
Furthermore  he  takes  advantage  of  the  favorable  markets  in  early 
spring  and  fall  and  plans  to  have  his  hogs  come  to  market  when  the 
majority  of  other  farmers  are  not  selling.  In  this  way  he  is  usually  able 
to  make  hog  production  a  profitable  undertaking.  It  is  to  the  few 
successful  producers — those  who  adopt  up-to-date  methods  and  practices 
and  make  money — to  whom  we  must  give  attention  if  we  are  to  find 
methods  and  practices  which  may  be  of  help  to  the  less  successful. 

SUCCESSFUL  FARMERS  POINT  THE  WAY 

In  the  remaining  pages  the  discussion  will  center  around  the  methods 
and  practices  of  some  Illinois  producers  who  have  been  especially  suc- 
cessful in  their  hog  enterprise.  An  account  of  the  experience  of  these 
farmers  it  is  hoped  will  be  of  help  to  other  farmers  in  improving  their 
methods  and  practices.  There  probably  are  many  other  hog  producers 
1  in  the  state  who  are  just  as  successful  as  these  men,  but  these  farms 
have  been  taken  for  illustration  because  there  is  information  about 
them  extending  back  over  a  continuous  ten-year  period.  They  are 
taken  also  because  they  illustrate  practices  which  are  especially  im- 
portant in  determining  the  success  of  the  hog  enterprise. 

In  the  discussion  of  these  farms,  as  well  as  in  the  subsequent  dis- 
cussion, major  emphasis  will  be  placed  on  the  importance  of  three 
practices:  (1)  adjusting  production  to  meet  anticipated  price  changes; 
(2)  marketing,  in  so  far  as  possible,  in  months  in  which  the  price  is 
highest;  (3)  taking  account  of  changes  in  price  relationships  and  select- 
ing from  the  many  alternative  lines  of  production  that  one  or  more  which 
gives  promise  of  yielding  the  greatest  net  return. 

It  is  recognized  that  these  practices  are  but  a  few  among  a  large 
number  of  factors  which  determine  success  in  hog  production.  In  focus- 
ing attention  on  them,  such  other  factors  as  management  of  the  breeding 


534 


BULLETIN  No.  293 


[June, 


herd,  care  and  attention  at  farrowing  time,  feeding  practices,  size  of 
litter,  pigs  saved  per  litter,  sanitation  and  disease  control,  must  not  be 
overlooked. 

Methods  and  Practices  on  Farm  No.  1 

The  operator  of  this  farm  of  140  acres  is  an  example  of  one  who  has 
been  very  successful  with  hogs  as  well  as  with  other  farm  enterprises. 
Besides  being  an  efficient  producer,  he  has  exercised  good  judgment  in 
planning  his  production  and  in  choosing  other  lines  to  supplement  hog 
production.  He  has  weighed  very  carefully  the  alternatives  open  to  him 
and  has  usually  selected  the  one  which  has  proved  profitable. 

Production  Pointed  for  High  Markets.  This  farmer  has  varied  the 
number  of  sows  bred  from  year  to  year  rather  widely  (Table  6).  How 
closely  these  adjustments  have  corresponded  with  changes  in  the  price 


TABLE  6. — ANNUAL  ADJUSTMENTS  IN  HOG  AND  SHEEP  PRODUCTION  ON  FARM  No.  1 


Number  of  sows  bred 

Year 

the  previous  fall  for 

Number  of  sheep  fed1 

spring  farrow 

1916 

20 

1917 

22 

1918 

47 

1919 

42 

1920 

25 

1921 

25 

900 

1922 

20 

927 

1923 

55 

None 

1924 

852 

444 

1925 

702 

850 

1926 

60 

lNo  data  available  prior  to  1921. 

2In  1924  73  sows  farrowed.     In  1925  this  farmer  had  trouble  in  getting  the  sows 
to  breed;  of  70  bred  only  34  farrowed. 


of  hogs  is  shown  in  Fig.  15.  It  will  be  observed  that  with  the  exception 
of  only  one  or  two  years  over  this  ten-year  period  this  farmer  has 
changed  his  production  at  the  strategic  time.  In  years  in  which  the  price 
of  hogs  was  low  relatively  speaking,  as  in  1921  and  1923,  he  has  adjusted 
his  production  in  such  a  way  as  to  have  only  a  few  hogs  to  sell.  In  other 
years,  like  those  of  1919  and  1925,  wrhen  the  price  was  high,  he  had  in- 
creased his  production  so  as  to  have  a  large  number  to  sell.  This  is 
indicated  by  the  big  increase  in  number  of  sows  bred;  which  in  1918  was 
47  and  in  1924,  85.  Only  73  sows,  however,  farrowed  in  1924.  Yet  in 


1927] 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


535 


1920,  1921,  and  1922,  when  the  price  was  low,  he  bred  only  24,  25,  and 
20  sows  respectively. 

Pigs  Farrowed  in  Late  Spring  and  Early  Summer.    On  this  farm 
only  one  litter  of  pigs  a  year  is  raised  by  each  sow.  The  sows  are  usually 


mice  or  HOGS 


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1916        1917        1918        1919        1920       1921        192?      1923       I92<t       1925       1926 
|  Numbtr  of  Sows  Brut  |  April  Pricr 

FIG.  15. — How  ONE  ILLINOIS  FARMER  HAS  ADJUSTED  His  PRODUCTION  OF  HOGS  TO 

MEET  ANTICIPATED  PRICE  CHANGES 

The  dotted  line  connecting  two  bars  indicates  when  the  pigs  resulting  from  a 
breeding  were  sold.  Note  that  the  sows  were  bred  each  year  between  December  and 
February  and  the  pigs  sold  in  April  of  the  second  year.  This  man  bred  more  sows 
when  the  outlook  was  for  higher  hog  prices  and  fewer  when  it  was  for  lower  prices. 
The  success  with  which  he  anticipated  prices  is  evidenced  by  the  fact  that  he  had  many 
hogs  to  sell  when  prices  were  high  and  few  to  sell  when  they  were  low. 


bred  so  as  to  farrow  in  late  spring  and  early  summer  (May  and  June). 
The  pigs  are  brought  along  gradually  on  legume  pasture  until  the  corn 
is  ready  for  "hogging,"  at  which  time  they  are  turned  into  the  cornfield. 
They  are  allowed  to  remain  until  the  corn  is  cleaned  up.  They  are  then 
sold  in  the  spring,  in  March  and  April.  Sometimes  the  sows  are  bred 
to  farrow  in  early  spring  and  the  pigs  are  pushed  for  the  September 


536  BULLETIN  No.  293  [June, 

market  to  get  ahead  of  the  big  rush  of  receipts  in  October,  November, 
and  December. 

Thus  this  man  not  only  increases  and  decreases  his  production 
from  year  to  year  at  the  strategic  time,  but  also  regulates  his  breeding 
so  as  to  have  his  pigs  ready  for  market  in  those  months  of  the  year  in 
which  hog  prices  are  usually  the  highest.  This  practice  makes  it  neces- 
sary to  look  ahead  for  a  period  of  a  year  or  more  to  what  conditions  will  be 
when  the  hogs  come  to  market.  That  this  farmer  has  judged  the  future 
with  remarkable  accuracy  is  attested  by  the  way  he  has  adjusted  his 
production  so  as  to  have  many  hogs  to  sell  when  the  price  is  high  and  few 
hogs  to  sell  when  the  price  is  low. 

Chooses  Profitable  Alternative  Enterprises.  In  a  system  of  farming 
in  which  most  of  the  crops  are  pastured  off,  as  on  this  farm,  the  farmer 
has  considerable  leeway  in  what  he  may  do.  He  may  feed  hogs  and 
sheep,  hogs  and  cattle,  hogs,  sheep  and  cattle,  or  he  may  not  feed  any 
livestock  at  all  but  sell  the  corn  and  oats  as  grain  and  use  the  legume 
pasture  mixture  for  soil  improvement.  On  this  farm  the  usual  practice 
is  to  make  hogs  the  major  livestock  enterprise  and  supplement  this  by 
feeding  either  sheep  or  cattle.  As  a  usual  thing  hogs  and  sheep  are  the 
chief  classes  of  livestock  handled. 

In  years  in  which  the  outlook  for  sheep  prices  is  favorable,  this 
man  increases  the  number  of  sheep  fed  somewhat  and  cuts  down  on  the 
number  of  hogs  produced  unless  the  price  outlook  for  hogs  is  also  very- 
favorable;  in  which  case  he  increases  both  hogs  and  sheep  and  buys 
extra  corn  if  necessary  to  feed  them  out.  This  he  did  in  1925.  He  fed 
850  sheep  in  1925  as  compared  with  444  in  1924  and  sold  over  $9,000 
worth  of  hogs  in  1925.  In  order  to  handle  the  extra  livestock,  he  bought 
about  1,300  bushels  of  corn.  In  1921  this  man  had  hog  cholera  on  his 
farm  and  as  a  result  lost  a  number  of  hogs.  Nine  hundred  sheep  were 
fed  out  to  bridge  this  loss. 

On  the  other  hand,  when  the  outlook  for  sheep  prices  is  not  so 
favorable,  he  cuts  down  considerably  on  sheep  and  increases  hogs  if  the 
market  outlook  is  favorable  for  hogs.  Or,  if  the  outlook  for  cattle  is 
good,  he  may  feed  cattle.  Thus  he  is  constantly  weighing  the  advantages 
and  disadvantages  of  the  various  alternatives  or  opportunities  open  to 
him  and  is  seeking  to  ascertain  which  method  of  utilizing  the  feed  will 
be  most  profitable. 

In  summarizing  his  practices  this  farmer  said  he  attempts  to  get  all 
the  information  available  on  the  outlook  for  hog  and  corn  prices,  also 
on  the  prices  of  other  alternative  enterprises  in  which  he  might  engage, 
such  as  cattle  and  sheep ;  likewise  he  attempts  to  ascertain  as  accurately 


1927}  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  537 

as  possible  what  other  farmers  are  thinking  about  and  are  expecting  to 
do,  and  then  he  engages  in  the  line  or  lines  of  production  which  give 
promise  of  returning  the  greatest  net  income.  In  conclusion  he  said, 
"I  think  it  is  a  very  good  policy  to  walk  when  most  other  farmers  are 
running  and  to  run  when  they  walk."  By  which  he  meant,  of  course, 
that  he  cuts  down  on  the  number  of  hogs  produced  when  other  farmers 
are  overdoing  the  thing,  and  gets  in  when  there  are  but  few  hogs  coming 
to  market. 

Farm  No.  2  Illustrates  Similar  Practices 

This  farm,  operated  by  a  young  tenant,  has  been  selected  because 
it  illustrates  four  or  five  practices  followed  in  handling  hogs  which  have 
proved  very  profitable. 

This  farmer,  it  will  be  noted,  has  varied  the  number  of  sows  bred 
from  year  to  year  rather  widely  (Table  7).  That  he  has  anticipated  the 
changes  in  the  price  of  hogs  and  has  changed  the  number  of  sows  bred 
in  tune  to  take  advantage  of  these  expected  changes  in  price  with  a  high 
degree  of  accuracy  is  evident  from  Fig.  16.  He  has  not  waited  until  the 
price  of  hogs  was  low  before  he  reduced  the  number  of  sows  bred,  but  has 
begun  to  reduce  six  months  to  one  year  before  the  big  slump  in  price  has 
come.  In  so  doing  he  has  escaped,  in  a  large  measure,  the  big  price  de- 
cline which  follows  heavy  receipts  and  has  avoided  being  caught  with  a 
large  number  of  hogs  to  sell  when  the  price  is  low. 

Furthermore  this  farmer  regulates  his  breeding  operations  in  such 
a  way  as  to  have  his  hogs  come  to  market  in  those  months  of  the  year 
in  which  hog  prices  are  usually  highest.  We  have  already  indicated  in 
the  previous  discussion  that  hog  prices  are  usually  higher  in  the  spring 


TABLE  7. — ANNUAL  ADJUSTMENTS  IN  Sows  BRED  ON  FARM  No.  2 


Year 

Number  of  sows  bred  the  previ- 
ous fall 

1917 

12 

1918 

23 

1919 

391 

1920 

362 

1921 

20 

1922 

40 

1923 

25 

1924 

44 

1925 

523 

1926 

40 

'27  sows  were  bred  for  spring  litters  and  12  for  fall  litters. 
226  sows  were  bred  for  spring  litters  and  10  for  fall  litters. 

3In  1925  52  sows  were  bred,  but  only  21  farrowed.    This  man  had  the  same 
trouble  in  getting  sows  to  breed  that  was  experienced  on  Farm  No.  1. 


538 


BULLETIN  No.  293 


[June, 


and  fall  months,  particularly  in  April  and  September,  than  at  any  other 

time.  These  are  the  months  in  which  this  farmer  plans  to  sell  his  hogs. 

His  usual  plan  is  to  breed  his  sows  to  farrow  in  March  and  May. 

The  March  pigs  are  pushed  and  sold  at  six  months  of  age  in  the  Septem- 


PRICE  OF  HOGS 


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^Numbtrofaowibrtd                               QApril  pric*                             Q  Stpttmbtr  prkf 

FIG.  16. — ANOTHER  ILLINOIS  FARMER  BASES  HOG  PRODUCTION  ON 

PRICE  OUTLOOK 

As  in  Fig.  15  the  dotted  lines  connecting  the  bars  indicate  when  the  hogs  resulting 
from  the  bred  sows  were  sold.  It  will  be  noted  that  this  farmer  sells  some  hogs  in 
September  and  others  in  April.  His  breeding  dates  consequently  run  from  early 
November  to  January  15  or  later.  How  closely  he  has  changed  his  production  to 
meet  anticipated  changes  in  price  may  be  seen  from  the  chart. 


ber  market,  and  the  May  pigs  are  held  longer  and  sold  at  ten  or  eleven 
months  of  age  the  following  March  or  April.  The  May  pigs  are  farrowed 
and  grown  on  legume  pasture.  This  in  addition  to  being  economical 
keeps  the  pigs  healthy  and  free  from  worms.  They  are  turned  into  the 
cornfields  in  the  fall  when  the  corn  is  ready  for  "hogging,"  and  are 
finished  in  the  feed  lot. 


1927]  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  539 

In  years  in  which  the  price  of  hogs  is  comparatively  high  at  time  of 
of  breeding  but  is  expected  to  slump  considerably  in  the  following  fall, 
this  farmer  plans  to  have  his  sows  farrow  very  early  in  March.  The  pigs 
are  pushed  as  rapidly  as  possible  and  got  on  to  the  market  the  latter 
part  of  August  or  early  September.  Thus  he  tries  to  get  ahead  of  the  big 
rush  of  spring  litters  that  starts  in  October  and  continues  thru  the  winter 
months. 

In  years  like  1924,  when  corn  is  expected  to  be  high  in  price  in  the 
summer  months,  he  has  more  of  his  sows  farrow  in  late  spring  and  early 
summer,  and  then  carries  the  pigs  along  gradually  and  sells  the  following 
spring.  In  this  way  he  avoids  the  heavy  receipts  in  the  fall.  In  such  a 
situation  most  farmers  feed  to  lighter  weights,  and  they  also  unload 
breeding  stock  to  avoid  feeding  the  high-priced  corn.  This  usually  re- 
sults in  the  peak  of  receipts  coming  earlier  in  the  season,  which  causes  the 
price  to  break  earlier  than  usual.  That  is  to  say,  the  usual  seasonal 
price  differential  is  smoothed  out  considerably. 

By  way  of  summary  then,  we  may  say  that  the  practices  which 
make  hog  production  profitable  on  this  farm  are :  (1)  efficient  production ; 
(2)  adjusting  production  from  year  to  year  according  to  the  outlook  for 
hog  prices;  (3)  selling  hogs  in  those  months  of  the  year  in  which  hog 
prices  are  usually  highest;  (4)  varying  the  weight  to  which  hogs  are  fed 
according  to  whether  corn  prices  are  high  or  low  in  relation  to  hog  prices. 

Farm  No.  3  Another  Example  of  Successful  Practices 

This  is  an  example  of  another  farmer  who  has  been  very  successful 
with  hogs.  This  man,  it  will  be  noted,  has  not  increased  or  decreased 
the  number  of  sows  bred  from  year  to  year  quite  so  widely  as  have  the 
other  two  farmers  we  have  been  discussing,  yet  he  has  kept  by  no  means 
a  constant  number  from  year  to  year  (Table  8).  In  fact,  he  has  varied 
from  12  sows  bred  in  1916,  to  36  in  1922,  and  to  35  in  1924. 

In  explaining  his  practices  this  man  says  he  does  not  plan  to  shift 
very  widely  from  year  to  year  but  expects  to  increase,  and  does  increase, 
the  number  of  sows  bred  in  years  in  which  the  price  outlook  for  hogs  is 
favorable.  Also  he  sells  at  varying  weights,  feeding  out  to  heavier 
weights  when  the  price  of  corn  is  low  in  comparison  with  the  price  of 
hogs  and  to  lighter  weights  when  the  price  of  corn  is  high  and  the  price 
of  hogs  low.  Fig.  17  shows  how  closely  he  has  adjusted  his  production 
from  year  to  year  to  meet  expected  changes  in  the  price  of  hogs. 

Furthermore  this  farmer,  like  the  men  previously  discussed,  regu- 
lates his  production  and  marketing  so  as  to  sell  on  the  high  seasonal 
markets.  He  has  part  of  his  sows  farrow  in  March  and  others  farrow  a 


540  BULLETIN  No.  293  [June, 

month  or  two  later.  The  March  pigs  are  sold  at  6  months  of  age  on  the 
following  September  market,  and  the  May  pigs  are  sold  the  following 
March  and  April  at  11  months  of  age.  The  March  pigs  weigh  160  to 
180  pounds  when  sold  in  September.  In  1925  he  received  $13.75  a  hun- 
dred weight  for  them. 

The  fall  pigs  are  usually  farrowed  in  August  or  September  and  are 
sold  either  the  next  April  or  in  July  and  August,  when  they  weigh  around 
300  pounds.  The  time  of  selling  the  fall  pigs  varies  with  the  market 

TABLE  8. — ANNUAL  ADJUSTMENTS  IN  Sows  BRED  ON 
FARM  No.  3 


Year 

Number  of  sows  bred  the 
previous  fall1 

1916 

12 

1917 

19 

1918 

29 

1919 

32 

1920 

21 

1921 

26 

1922 

36 

1923 

32 

1924 

35 

1925 

132 

1926 

28 

1  About  one-half  as  many  sows  are  bred  for  fall  litters  as  for  spring  litters  each 
year. 

2In  1925  this  farmer  had  expected  to  breed  30  sows  but  the  hogs  got  pneumonia 
and  he  sold  16  or  17  gilts. 


situation  and  with  the  price  of  corn.  If  the  price  of  corn  is  comparatively 
high,  he  sells  at  lighter  weights  in  April,  but  if  com  is  cheap  and  hog  prices 
favorable,  he  feeds  out  longer  and  sells  in  either  July  or  August,  depend- 
ing upon  the  market  at  the  time. 

This  farmer  plans  to  feed  all  of  his  corn.  He  figures  that  by  pro- 
ducing efficiently  he  can  make  as  much  out  of  his  corn  by  feeding  it  to 
hogs,  even  if  hog  prices  are  low,  as  he  can  by  selling  corn.  In  such  situ- 
ations, however,  he  feeds  out  to  lighter  weights. 

Thus  in  addition  to  being  an  efficient  producer  of  hogs,  this  farmer 
also  adjusts  his  production  somewhat  from  year  to  year  to  meet  ex- 
pected price  changes,  sells  on  the  high  seasonal  markets,  and  feeds  out 
to  heavy  or  light  weights,  depending  upon  the  relative  price  of  corn 
and  hogs.  In  other  words,  he  adjusts  his  production  and  marketing  to 
take  advantage  of  both  favorable  and  unfavorable  situations  and  tries 
to  turn  each  to  his  own  advantage. 

Practices  similar  to  these  we  have  been  discussing  on  the  above 
three  farms  are  followed  on  numerous  other  farms  in  Illinois.  Discussion 


1987] 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


541 


of  further  illustrations,  however,  would  be  largely  a  repetition  of  what 
has  been  said.  Even  if  we  were  to  cite  practices  of  successful  producers 
varying  somewhat  from  those  we  have  just  been  discussing,  no  material 
gain  would  result.  This  is  true  because  they  have  as  their  chief  aim  the 
same  objective,  namely,  to  so  adjust  production  and  marketing  as  to  hit 
the  favorable  markets  and  avoid  the  unfavorable  ones  as  often  as  possible. 


PRICE  OF  HOGS 
AT  CHICAGO 
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1916         917        1918        1919        1920       1921        1922        1923       1924     1925         1926 

J  Number  of  sows  brr  d                                    ^April  price                                   P]  September  prict 

FIG.  17. — How  A  THIRD  ILLINOIS  FARMER  HAS  SUCCEEDED  IN  BRINGING  HOG 

PRODUCTION  INTO  LINE  WITH  THE  BETTER  MARKETS 

Like  Farmer  No.  2  this  farmer  sells  hogs  in  both  spring  and  fall.  He  does  not 
plan  to  shift  very  widely  from  year  to  year  but  he  sells  at  varying  weights,  feeding 
out  to  heavier  weights  when  the  price  of  corn  is  favorable,  and  to  lighter  weights 
when  it  is  less  favorable. 


Variations  in  practice  are  to  be  expected  on  individual  farms,  for  each 
farm  has  conditions  peculiar  to  itself  and  each  farmer  knowing  these 
conditions  will  select  those  lines  of  production  and  adopt  those  practices 
which  seem  to  him  to  best  fit  his  peculiar  situation  and  which  give 
promise  of  returning  the  greatest  profit. 


542  BULLETIN  No.  293  [June, 

PRACTICES  OF  THE  MAJORITY  OF  FARMERS 

The  only  measure  we  have  of  the  manner  in  which  the  majority 
of  farmers  vary  their  hog  production  from  year  to  year  is  the  variation 
in  the  receipts  of  hogs  at  the  central  markets.  The  spring  pig  crop 
usually  begins  moving  to  market  the  latter  part  of  September  and 
continues  thru  the  following  April. 

Now  farmers  who  produce  hogs  coming  to  market  at  this  time  each 
year  have  to  decide  from  10  to  15  months  in  advance  upon  how  many 
sows  they  will  breed  to  farrow  in  the  spring.  If  we  take  the  total  re- 
ceipts from  September  to  April  each  year  as  representing  the  spring  pig 
crop,  and  assume  that  an  average  size  of  litter  per  sow  was  raised  and 
brought  to  market,  then  a  rough  estimate  of  the  number  of  sows  bred  for 
spring  litters  each  year  can  be  secured.1  A  comparison  between  such 
estimates  and  the  average  price  received  for  the  pigs  resulting  from  that 
breeding  will  give  an  indication  of  how  the  majority  of  farmers  have 
adjusted  their  production  from  year  to  year  and,  further,  the  effect  such 
adjustments  had  on  the  price  of  hogs  10  to  15  months  later. 

Fig.  18  has  been  constructed  in  this  way.  It  shows  the  relation 
between  the  estimated  number  of  sows  bred  for  spring  litters  each  year 
by  the  majority  of  farmers2  and  the  average  price  for  which  the  animals 
resulting  from  that  breeding  sold  on  the  Chicago  market  starting  with 
the  next  September  and  running  thru  the  following  April.  With  the 
exception  of  only  three  or  four  years  out  of  this  whole  period,  there  was 
an  inverse  relationship  between  the  estimated  number  of  sows  bred  and 
the  prices  received  for  the  hogs  resulting  from  that  breeding  10  to  15 
months  later. 

This  practice  of  the  group  is  diametrically  opposed  to  the  practices 
of  the  three  farmers  which  were  discussed  above.  Whereas  they  adjusted 
their  production  so  as  to  have  few  hogs  to  sell  when  the  price  was  low  and 
more  hogs  to  sell  when  the  price  was  high,  the  group  had  many  hogs  to 
sell  when  the  price  was  low  and  few  hogs  to  sell  when  it  was  high.  In 


JOf  course  an  estimate  thus  obtained  is  not  strictly  accurate.  It  assumes  that  the 
September  to  April  receipts  include  only  pigs  farrowed  in  the  spring;  also  that  the 
average  size  of  litter  is  the  same  from  year  to  year.  The  receipts  include,  as  a  matter 
of  fact,  both  sows  and  stags  in  addition  to  the  pigs  farrowed  in  the  spring,  and  the 
assumption  consequently  may  be  in  error  to  the  extent  this  is  true.  However,  it  may 
be  that  the  gilts  and  boars  saved  out  of  the  spring  pig  crop  to  be  used  for  breeding 
animals  for  the  next  year's  crop  are  as  large  in  number  as  the  old  sows  and  stags 
included  in  the  receipts;  hence  the  receipts  from  September  to  April  may  measure 
quite  closely  after  all  the  spring  pig  crop.  While  there  would  be  expected  to  be  some 
difference  in  numbers  from  year  to  year,  these  differences  would  tend  to  average  out 
over  a  period  of  years. 

2 An  average  litter  of  4J^  pigs  was  assumed  to  be  raised  and  brought  to  market, 
and  this  divided  into  the  receipts  for  the  period  indicated  each  year  gives  a  rough 
estimate  of  the  number  of  sows  bred. 


1927} 


ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND 


543 


other  words,  the  three  successful  producers  capitalized  on  the  mistaken 
estimates  of  the  majority  of  producers  and  had  their  hogs  ready  to  mar- 
ket when  they  stood  the  greatest  chance  of  realizing  good  returns  from 
them.  Furthermore  they  were  able  to  sell  their  hogs  at  favorable 
prices  in  April  and  September  because  the  majority  of  other  farmers 
were  not  selling  many  hogs  then. 

Obviously  if  the  majority  of  farmers  attempted  to  market  their 
hogs  in  the  same  way  as  the  more  successful  group,  they  would  not 
meet  with  the  same  results.  This  is  true  because  as  soon  as  they  changed 
their  present  practice  of  selling  in  the  late  fall  and  winter  months  and 


DOLLARS 
7.50 
5.00 

a  so 
0 

MILLIONS 


Average  Price  per  cwt  from  Sept.  To  April  in  1910-14  Dollars 


!         >        ,'      Estimated  Number  of  Sows  Bred  for  Sprinfc  Farrow       / 


FIG.  18.  —  How  THE  MAJORITY  OF  FARMERS  HAVE  ADJUSTED  THEIR 

HOG  PRODUCTION 

When  the  price  of  hogs  is  low,  the  majority  of  farmers  have  more  hogs  to  sell 
than  when  it  is  high,  and  when  the  price  is  high  they  have  fewer  to  sell. 


began  to  sell  in  April  and  September,  the  April  and  September  prices 
of  hogs  would  fall  and  the  prices  in  the  fall  and  winter  would  rise. 
Or  in  other  words,  the  high  seasonal  markets  would  shift  to  the  winter 
and  summer  months,  and  the  low  markets  would  come  in  the  spring  and 
fall.  If  such  a  shift  were  made,  these  three  farmers,  and  many  others 
who  do  the  same  thing,  would  doubtless  make  a  shift  in  their  present 
methods  and  practices  and  plan  their  breeding  and  marketing  so  as  to 
have  their  hogs  come  to  market  in  the  late  fall  and  winter  months  and 
in  the  summer. 

It  is  believed  that  the  practices  of  the  better  informed  farmers 
would  become  more  general  if  the  relation  between  production  and 
price  and  differences  in  seasonal  markets  were  more  generally  under- 
stood. Our  concern  then  is  not  so  much  to  suggest  what  the  success- 
ful producers  should  do  or  should  not  do.  They  are  likely  to  do  that 
which  will  be  most  advantageous  for  them  from  time  to  time  anyway. 


544  BULLETIN  No.  293  [June, 

The  question  is  rather,  What  may  a  much  larger  group  of  farmers 
do,  from  a  marketing  standpoint,  to  make  hog  production  more  gen- 
erally profitable? 

To  answer  this  question  will  involve  a  consideration  of  the  possi- 
bilities of  "smoothing  out"  the  hog-price  cycle,  and  of  the  practices 
which  the  majority  of  farmers  can  adopt  so  as  to  avoid  or  prevent,  in 
some  measure,  these  periodic  shiftings  of  hog  prices  up  and  down. 

POSSIBILITIES  OF  SMOOTHING  OUT  THE  HOG-PRICE  CYCLE 

In  previous  pages  we  have  discussed  in  considerable  detail  the  reasons 
for  the  periodic  shifting  up  and  down  of  hog  prices.  While  these  shifts  are 
due  to  a  number  of  things,  the  chief  cause,  we  have  seen,  is  the  tendency 
for  farmers  to  go  into  hog  production  too  heavily  in  periods  of  high 
prices  and  to  curtail  too  much  in  periods  of  low  prices.  Or  in  other 
words,  the  farmers  themselves  are  in  large  measure  responsible  for  these 
gluts  and  depressions.  From  this  it  follows  that  they  must  plan  their 
production  differently  if  they  expect  to  smooth  out  or  minimize  their 
effect.  What  then  are  the  possibilities  of  doing  this,  and  what  practices 
would  have  to  be  followed  to  accomplish  it? 

The  present  practice  of  the  farmers  of  Illinois  and  other  middle- 
western  states  of  having  their  pigs  farrowed  in  the  spring  and  summer 
months  and  marketed  in  the  late  fall  and  winter  months  did  not  develop 
just  by  chance.  In  having  their  pigs  farrowed  in  the  spring,  farmers  get 
away  from  winter  hog  production.  When  pigs  farrow  in  the  winter,  they 
are  more  trouble,  require  better  buildings  and  equipment  and  more 
care  and  attention.  Furthermore  pigs  farrowed  in  the  winter  and  put 
on  the  early  market  in  the  fall  have  to  be  fed  out  on  old  corn,  and  this 
adds  to  the  expense  of  production.  Also,  the  number  of  pigs  saved  will 
probably  be  smaller  in  the  winter  than  in  the  summer. 

These  considerations  have  probably  had  much  to  do  in  determining 
the  choice  of  farmers  for  producing  hogs  in  the  spring.  However,  in 
having  the  pigs  farrowed  in  the  spring  and  sold  in  the  late  fall  and  winter 
months,  they  hit  the  low  markets  and  must  accept  a  lower  price  for  them. 
It  is  for  this  reason  that  it  would  be  more  profitable,  probably,  for  many 
more  farmers  to  sell  on  the  September  and  April  markets.  While  this 
would  tend  to  smooth  out  the  seasonal  differential,  and  make  prices 
somewhat  less  favorable  for  farmers  who  sell  at  that  time,  it  also  would 
cut  down  the  number  marketed  in  the  late  fall  and  winter  months  and 
thereby  improve  the  prices  received  by  the  majority  of  producers,  who 
sell  the  major  portion  of  their  hogs  at  that  time. 

This,  however,  is  only  one  phase  of  the  adjustment  problem. 
Another  phase,  and  probably  a  more  important  one,  is  that  of  balancing 


1927]  ADJUSTING  HOG  PRODUCTION  TO  MARKET  DEMAND  545 

up  production  to  coincide  more  closely  with  changing  price  conditions. 
Instead  of  looking  so  much  at  the  relationship  between  corn  and  hog 
prices  at  the  time  of  breeding  as  they  have  in  the  past,  farmers  should 
look  more  to  the  future,  to  what  the  situation  is  likely  to  be  when  the 
hogs  are  being  fed  out  and  marketed.  That  is,  they  should  be  influenced 
more  by  relationships  which  likely  will  exist  between  corn  and  hog 
prices,  than  by  those  which  have  prevailed  in  the  immediate  past  or 
exist  at  the  time  of  breeding. 

When  hog  prices  are  very  high,  farmers  usually  should  not  go  so 
heavily  into  hog  production  but  should  hold  off  somewhat  and  try  to 
get  in  later  when  fewer  hogs  are  coming  to  market.  The  relationship 
between  corn  and  hog  prices  may  be  favorable  at  the  time  of  breeding 
for  next  year's  litters,  yet  by  the  time  these  hogs  get  to  market  the 
relationship  may  have  changed  completely.  Hence  by  going  into  pro- 
duction heavily  without  regard  to  the  future,  farmers  simply  run  a  very 
heavy  risk  of  adding  to  a  supply  already  adequate  and  the  result  is  a 
further  drop  in  price. 

It  seems  to  be  the  psychology  of  hog  producers  to  think  when  hog 
prices  are  high  that  they  will  continue  high  indefinitely,  and  likewise 
when  they  are  low,  that  they  will  be  low  for  some  time.  This  short- 
sighted viewpoint  is  largely  responsible  for  the  big  "ups  and  downs" 
in  the  market.  If,  therefore,  farmers  would  have  more  stability  in  the 
market,  they  must  adjust  their  production  more  closely  to  changing 
economic  conditions. 

There  are  those  who  believe  that  the  whole  farming  business,  hog 
production  along  with  the  rest,  should  be  kept  definite  and  fixed.  That 
is,  they  believe  farmers  should  grow  about  the  same  acreage  of  the 
same  crops,  and  keep  about  the  same  number  of  each  class  of  livestock, 
from  year  to  year.  They  feel  that  if  farmers  will  get  into  a  definite 
system  of  farming  and  stick  to  it,  we  will  have  much  greater  stability 
in  agricultural  prices. 

Such  a  static  plan  of  production  obviously  assumes  that  the  demand 
for  agricultural  products  also  will  remain  constant  from  year  to  year. 
Of  course,  we  know  that  demand  does  not  and  will  not  remain  constant 
for  long  at  a  time.  We  are  living  in  a  dynamic  society  in  which  the 
forces  making  up  both  demand  and  supply  are  in  a  constant  state  of  flux. 
Economic  relationships  are  constantly  changing.  The  fact  that  consum- 
ers will  take  a  certain  amount  of  agricultural  products  at  one  time  at  a 
particular  price  does  not  mean  that  they  will  take  the  same  amount  at 
another  time  at  the  same  price.  They  increase  and  decrease  their 
purchases  as  their  desires,  abilities,  and  opportunities  for  making  these 
purchases  increase  and  decrease.  So  adjustments  must  necessarily  be 


546  BULLETIN  No.  293 

made  from  time  to  time  if  there  is  to  result  any  reasonable  degree  of 
balance  between  supply  and  demand. 

It  is  possible  to  make  the  necessary  adjustments  in  hog  production 
from  year  to  year  without  disrupting  other  enterprises  in  the  farm  organi- 
zation to  any  great  extent.  Such  a  plan  of  production  does  not  mean 
that  a  farmer  should  or  would  be  "jumping  in  and  out"  of  hog  pro- 
duction from  year  to  year.  The  three  men  cited  above  changed  their 
production  rather  widely  from  year  to  year,  yet  none  of  them  went 
completely  out  any  year.  Such  a  radical  change  would  not  be  necessary, 
and  likely  would  prove  unprofitable.  If  each  farmer,  or  the  majority 
of  farmers,  would  adjust  his  hog  production  more  in  the  light  of  probable 
future  prices  than  on  the  basis  of  past  or  prevailing  prices,  only  a  small 
variation  in  production  would  be  necessary  to  bring  about  greater 
stability  in  hog  prices.  The  important  thing  to  do  is  to  adjust  at  the 
strategic  time.  With  the  large  amount  of  information  now  available 
and  becoming  available  in  increasing  amounts,  on  the  market  outlook, 
intentions  to  breed,  pigs  farrowed  and  saved,  etc.,  the  farmer  has  the 
means  of  determining,  with  a  fairly  high  degree  of  accuracy,  when  is 
the  strategic  time  to  change.  The  greater  the  accuracy  with  which  this 
is  done  the  more  stable  prices  will  become. 

In  conclusion,  then,  if  the  Illinois  farmer  would  have  hog  production 
become  more  profitable,  he  will  find  it  to  his  advantage,  in  addition 
to  producing  efficiently,  to: 

1.  Adjust  his  production  from  year  to  year  according  to  the  out- 
look for  hog  prices  rather  than  be  influenced  too  much  by  past  prices  or 
by  prices  prevailing  at  time  of  breeding. 

2.  Take  into  account  changes  from  year  to  year  in  price  relation- 
ships between  hogs  and  other  enterprises  such  as  cattle,  sheep,  corn, 
etc.,  and  select  from  the  alternative  lines  of  production  one  or  more 
which  give  promise   of  yielding  the  greatest  net  return  to  the  farm 
business  as  a  whole. 

3.  Sell  hogs,  in  so  far  as  costs  and  prices  justify,  in  those  months 
when  hog  prices  usually  are  highest. 

4.  Vary  the  weight  to  which  hogs  are  fed  out  and  marketed  accord- 
ing to  the  relationship  between  corn  and  hog  prices. 


STATISTICAL  APPENDIX 

In  the  foregoing  discussion  reference  has  been  made  from  time  to 
time  to  statistical  studies  which  were  used  as  a  basis  for  the  discussion. 
Emphasis,  however,  was  placed  on  the  application  of  the  results  secured 
rather  than  on  the  particular  statistical  methods  used  in  arriving  at  the 
results.  Yet  there  may  be  some  readers  who  are  concerned  as  much  or 
more  with  the  method  of  analysis  used,  as  with  the  results  secured. 
It  is  for  these  readers  that  this  statistical  appendix  is  included. 

Part  I  of  the  bulletin,  which  discusses  the  factors  determining  the 
price  of  hogs,  was  based  on  a  multiple  correlation  analysis  made  by 
Messrs.  Ezekiel  and  Haas  of  the  Bureau  of  Agricultural  Economics, 
U.  S.  Department  of  Agriculture.  The  methods  of  analysis  employed 
by  them  have  been  discussed  in  detail  in  U.  S.  Department  of  Agriculture 
Bulletin  1440  and  will  not  be  repeated  here. 

Parts  II  and  III  of  this  bulletin,  dealing  with  the  elasticity  of  the 
supply  of  hogs,  is  based  on  a  statistical  study  made  by  the  writer,  and 
it  is  the  methods  employed  in  that  analysis  which  will  be  discussed  in 
this  Appendix. 

THEORETICAL  BASIS 

Back  of  a  statistical  analysis  such  as  this  must  lie  considerable 
economic  theorizing.  Numerous  assumptions  and  hypotheses  have  to 
be  made.  In  fact  the  whole  "set-up"  of  the  analysis  is  more  economic 
than  statistical.  The  success  of  the  statistical  analysis  consequently 
is  in  large  part  dependent  upon  the  reasonableness  of  the  assumptions 
and  the  accuracy  with  which  the  economic  analysis  is  made. 

Variations  in  receipts  of  hogs  in  the  terminal  markets  indicate  that 
the  production  of  hogs  fluctuates  from  year  to  year.  Our  problem  is  to 
ascertain  and  explain  the  causes  for  these  annual  fluctuations  in  pro- 
duction. Why  is  it  few  hogs  are  produced  some  years  and  many  hogs 
are  produced  other  years?  Or,  what  are  the  factors  which  cause  farmers 
to  respond  in  their  production  of  hogs  as  they  do? 

In  attempting  to  isolate  the  factors  responsible  for  these  variations 
in  production  numerous  hypotheses  and  assumptions  were  made,  chief 
of  which  are: 

1.  That  fluctuations  in  hog  production  are  in  large  measure  the 
result  of  conscious  efforts  of  farmers  and  to  a  lesser  extent  due  to  condi- 
tions over  which  they  have  no  control. 

547 


548  BULLETIN  No.  293  [June, 

2.  That  farmers  as  a  group  tend  to  engage  in  that  line  or  those  lines 
of  production  which  they  believe  will  return  them  the  greatest  net  profit 
for  the  resources  at  their  command.  (This  is  not  to  say  that  they  always 
do  engage  in  that  line  of  production  which  returns  the  greatest  net 
profit.) 

3.  That  hog  farmers  not  only  weigh  the  advantages  and  disad- 
vantages of  opportunities  for  profit  in  alternative  lines  of  production 
open  to  them  but  that  they  will  be  induced  to  go  more  heavily  or  less 
heavily  into  the  particular  line  or  lines  of  production  in  which  there  is  the 
greatest  apparent  comparative  advantage. 

4.  That  farmers  in  different  type-of-f arming  areas  will  not  respond 
in  their  hog  production  to  changes  in  given  factors  in  the  same  way,  for 
the  reason  that  they  are  producing  under  different  conditions  and 
financial  circumstances. 

5.  That  the  important  factors  influencing  production  (receipts) 
from  year  to  year  and  the  relative  importance  of  each  factor  upbn 
receipts   can  be  ascertained  and  measured   by  multiple   correlation 
analysis. 

6.  That  having  found  the  quantitative  relationships  subsisting 
between  receipts  of  hogs  at  Chicago  and  the  various  factors  influencing 
receipts  under  given  conditions  in  the  past,  it  would  be  theoretically 
possible,  general  economic  conditions  remaining  the  same,  to  forecast 
the  receipts  coming  to  Chicago  in  the  immediate  future  with  a  fair  de- 
gree of  accuracy. 

THE  SERIES 

With  these  assumptions  and  hypotheses  in  mind  our  next  problem 
is  to  measure  the  quantitative  effect  of  the  various  factors  which 
theoretically  are  assumed  to  have  an  influence  upon  hog  production. 
Before  this  is  possible,  however,  it  first  is  necessary  to  select  data  giving 
a  continuous  series  over  a  period  of  years  for  each  factor  and  further, 
to  get  the  data  in  a  suitable  form  for  statistical  treatment.  The  period 
selected  for  the  analysis  runs  from  1898  to  1916. 


CHARACTER  AND  LIMITATION  OF  DATA 

Receipts  of  live  hogs  at  Chicago  are  used  as  an  index  of  the  pro- 
duction of  hogs.  This  series  is  not  quite  so  reliable  an  index  of  receipts 
as  are  receipts  under  inspected  slaughter.  The  reason  the  latter  is  not 
used  is  that  data  back  of  1907  on  inspected  slaughter  are  not  available 
and  a  series  covering  earlier  years  is  desired  in  order  to  avoid  going  into 
the  war  years. 


1927]  STATISTICAL  APPENDIX  549 

Also  the  objection  may  be  raised  that  receipts  thus  taken  are  not 
a  fair  index  of  production  because  they  include,  in  addition  to  actual 
pigs  farrowed  and  marketed  during  the  year,  old  sows,  stags,  and  boars. 
While  possibly  an  error  may  arise  in  this  connection,  it  probably  is  not 
very  large,  as  the  young  gilts  and  boars  kept  for  breeding  stock  are  taken 
out  of  the  current  year's  production  and  probably  offset  the  number  of 
old  breeding  stock  sent  to  market. 

The  prices  of  medium  to  choice  heavy  hogs,  No.  2  mixed  corn,  and 
1200  to  1500-pound  steers  at  Chicago  are  taken  and  treated  as  described 
below.  The  data  on  loss  from  disease,  percentage  of  non-merchant- 
able corn,  and  number  of  breeding  sows  on  farms  are  taken  from  the 
reports  of  the  Bureau  of  Crop  Estimates.  The  climatic  data  for  calcu- 
lating the  index  of  climate  are  taken  from  U.  S.  Weather  Bureau  reports. 

DESCRIPTION  OF  SERIES 

(Dependent  Variable} 

Symbol 

Xi Receipts  of  hogs  at  Chicago  starting  in  September  of  each  year  and 

running  thru  the  following  April.  Calculated  for  the  period  1898  to 
1916  and  the  percentage  changes  in  receipts  from  one  year  to  the 
next  calculated  and  used  as  the  dependent  series. 

(Independent  Variables) 

Xz December  corn-hog  ratio.  Calculated  by  dividing  the  value  of  100 

pounds  of  hogs  at  Chicago  in  December  by  the  value  of  11.4  bushels 
of  corn  in  the  same  month. 

X3 Average  June  to  November  corn-hog  ratio.  Calculated  by  dividing  the 

average  value  of  100  pounds  of  live  hogs  from  June  to  November 
by  the  average  value  of  11.4  bushels  of  corn  for  the  same  period  at 
Chicago. 

Xt Average  January  to  March  corn-hog  ratio.  Calculated  by  dividing 

the  average  value  of  100  pounds  of  live  hogs  from  January  to  March 
by  the  average  value  of  11.4  bushels  of  corn  for  the  same  period  at 
Chicago. 

Xs Index  of  climate  at  farrowing  time.  Composite  of  three  factors:  (1) 

departure  of  monthly  temperature  from  normal,  (2)  number  of  rainy 
days  in  each  month,  (3)  number  of  sudden  changes  in  temperature 
(a  sudden  change  in  temperature  reckoned  as  a  drop  in  temperature 
of  10  degrees  or  more  to  a  level  of  10  degrees  above  zero  or  below.) 
Readings  taken  at  Monmouth,  Illinois,  Iowa  City,  Iowa,  and  Lan- 
caster, Wisconsin,  in  February,  March,  and  April,  from  1897  to  1925. 
With  these  data  available  the  first  problem  was  to  compute  a 
regional  monthly  index  of  temperature,  rainfall  and  sudden  changes. 
The  readings  for  each  factor  each  month  for  each  location  or  state 
were  combined  according  to  the  relative  number  of  hogs  sent  to  Chi- 
cago from  each  state.  Thus  the  February  regional  index  of  departure 
of  temperature  from  normal  was  computed  by  multiplying  the 
February  normal  departure  at  Monmouth,  by  the  relative  number  of 
hogs  sent  to  Chicago  from  Illinois,  and  similarly  the  February  de- 
partures from  normal  at  Iowa  City  and  Lancaster  were  multiplied  by 
the  relative  number  of  hogs  sent  to  Chicago  from  Iowa  and  Wis- 
consin respectively:  the  three  products  summed  giving  the  February 
regional  index  of  departure  of  temperature.  In  a  similar  way  regional 


550  BULLETIN  No.  293  [June, 

indexes  were  computed  for  the  other  factor  in  February  as  well  as 
for  the  other  two  months. 

These  monthly  regional  indexes  for  temperature,  rainfall,  and 
sudden  changes  were  then  combined  into  annual  indexes  of  temper- 
ature, rainfall  and  sudden  changes.  Recognizing  that  a  February 
change  in  temperature,  rainy  days  or  sudden  changes  should  not 
have  as  much  weight  in  the  final  index  as  a  change  in  each  of  these 
factors  in  March  and  April,  it  was  necessary  to  devise  some  scheme 
of  weighting  which  would  take  cognizance  of  the  difference.  It  was 
assumed  that  a  logical  method  of  weighting  each  month  would  be 
on  the  basis  of  the  relative  number  of  pigs  farrowed  in  each  month. 
This  was  done.  This  gave  annual  indexes  of  temperature,  number  of 
rainy  days  and  number  of  sudden  changes  for  the  region. 

Before  combining  these  three  indexes  into  the  final  index  of 
climate  it  became  necessary: 

1.  To  correct  them  for  differences  in  variability.    It  was  noted 
that  the  temperature  index  was  much  more  variable  than  the  other 
two  and  unless  this  variability  were  corrected  for,  it  would  have  a 
disproportionate  influence  in  the  final  index.   Accordingly  the  stand- 
ard deviations  of  the  three  indexes  were  computed,  and  considering 
the  temperature  series  as  a  base,  the  other  two  series  were  corrected 
to  conform  to  it,  that  is,  made  to  have  the  same  variability. 

2.  To  determine  the  weights  to  use  for  each  of  the  factors, 
temperature,  rainy  days,  and  sudden  changes. 

The  three  indexes  corrected  for  variability  were  considered  as 
independent  variables  along  with  the  other  independent  variables 
and  correlated  with  receipts  as  the  dependent  variable  in  a  linear 
multiple-correlation  solution.  The  net  regressions  obtained  in  this 
solution  for  each  were  used  as  the  weights  in  combining  the  three  into 
the  final  index.  These  were  as  follows:  temperature  +  .02938,  rainy 
days  — .03974,  and  sudden  changes  — .27525. 

The  final  index  thus  secured  was  negative  for  some  years  and 
positive  for  others.  In  order  to  get  rid  of  negative  signs,  100  was 
added  to  each  annual  index.  The  resulting  indexes  were  then  turned 
into  percentages  by  taking  the  percentage  change  in  the  index  from 
year  to  year. 

Xi.~. Time  or  trend  was  taken  as  an  ascending  arithmetic  series  from 

1898  to  1916;  that  is,  as  1,  2,  3,  4,  and  so  on,  up  to  18,  the  total 
number  of  years  covered  in  the  study.1 

Xi December  steer-hog  ratio.    Calculated  by  dividing  the  value  of  100 

pounds  of  heavy  hogs  at  Chicago  in  December  by  the  value  of  100 
pounds  of  1200  to  1500-pound  steers  at  Chicago  for  the  same  period. 

Xs Change  in  percentage  of  non-merchantable  corn  in  Illinois  and  Iowa 

from  previous  year.  Calculated  by  taking  the  percentage  of  non- 
merchantable  corn  each  year  in  each  state  and  weighting  each  ac- 
cording to  the  average  size  of  crop  in  each  state  from  1909  to  1913. 
The  resulting  products  were  then  totalled  and  turned  into  per- 
centages by  calculating  the  percentage  changes  from  year  to  year. 

-X~9 Disease  loss.     Crop  estimates  data  showing  estimated  loss  from 

disease  each  year  in  Iowa,  Illinois,  Minnesota  and  Wisconsin  were 
totalled  and  turned  into  percentages  by  calculating  percentage 
changes  from  year  to  year. 

X 10 Estimated  number  of  breeding  sows  on  farms.    Data  taken  from 

Reports  of  Bureau  of  Crop  Estimates  were  totalled  for  Iowa,  Illi- 
nois, Wisconsin,  and  Minnesota,  and  then  the  percentage  change  in 
numbers  from  year  to  year  calculated. 


1The  error  in  eliminating  secular  trend  and  seasonal  variation  before  correlating 
time  series.   B.  B.  Smith.   Jour.  Amer.  Statis.  Assoc.  20  (n.s.  152),  543-545.    1925. 


1987] 


STATISTICAL  APPENDIX 


551 


It  will  be  noted  that  percentage  changes  in  receipts  from  year  to 
year  have  been  computed  instead  of  deviations  from  trend.  Since  we  are 
attempting  to  measure  the  factors  which  cause  farmers  to  react  as  they 
do  from  year  to  year,  it  is  reasonable  to  suppose  that  they  will  react  more 
quickly  to  a  change  in  a  condition  with  respect  to  the  immediate  past 
than  they  will  with  respect  to  a  long-time  trend  or  norm.  That  is,  they 
remember  more  vividly  situations  and  relationships  in  the  immediate 
past. 


TABLE  1. — THE  SERIES 


Sept. 
to  Apr. 
of  year 

Corn-hog  ratio 

Index  of 
climate 
Feb.  to 
Apr. 

first 

Time 

Hog- 
steer 
ratio 
Dec. 

ceding 

Percent 
non-mer- 
chantable 
corn  pre- 
ceding 

Disease 
loss 

Number 
of 
breeding 
sows  on 
farms 
first 

Receipts 
of  hogs 
at 
Chicago 

Dec. 
pre- 
ceding 

Av.  6 
months 
June  to 

Av.  Jan. 
to  Mar. 
first 

year 

Nov. 

year 

year 

year 

year 

year 

Xt 

Xt 

Xt 

Xt 

Xt 

XT 

X» 

X. 

XlO 

X, 

1898-99.. 

113 

117 

119 

93 

1 

78 

42 

94 

91 

105 

1899-1900 

83 

105 

93 

110 

2 

67 

235 

48 

97 

91 

1900-01. 

115 

113 

127 

87 

3 

68 

71 

333 

100 

101 

1901-02. 

110 

110 

123 

113 

4 

91 

64 

45 

97 

109 

1902-03. 

84 

98 

94 

93 

5 

105 

150 

117 

99 

84 

1903-04. 

109 

104 

138 

112 

6 

120 

248 

93 

101 

104 

1904-05. 

95 

98 

93 

72 

7 

94 

111 

77 

95 

98 

1905-06. 

86 

89 

97 

131 

8 

95 

35 

131 

98 

102 

1906-07. 

93 

89 

124 

94 

9 

98 

95 

102 

102 

91 

1907-08. 

119 

112 

137 

86 

10 

108 

56 

132 

106 

112 

1908-09. 

68 

88 

69 

119 

11 

88 

442 

74 

96 

101 

1909-10. 

84 

75 

90 

98 

12 

90 

39 

92 

97 

70 

1910-11. 

116 

113 

130 

113 

13 

124 

194 

121 

93 

116 

1911-12. 

140 

131 

136 

94 

14 

124 

37 

246 

115 

119 

1912-13. 

79 

88 

85 

92 

15 

85 

187 

112 

92 

90 

1913-14. 

128 

101 

141 

106 

16 

82 

78 

121 

98 

108 

1914-15. 

97 

105 

116 

84 

17 

92 

161 

70 

97 

99 

1915-16. 

96 

97 

81 

128 

18 

81 

63 

57 

104 

123 

The  use  of  first  differences  also  does  away  with  the  necessity  of 
computing  trends,  and  hence  eliminates  errors  arising  from  the  use  of 
erroneous  trends.  Trends  computed  for  pre-war  years  may  be  used 
with  considerable  confidence.  When  these  trends  are  projected  into 
the  war  and  post-war  periods,  however,  they  must  be  used  with  much 
more  caution.  Sufficient  time  has  not  elapsed  since  the  war  to  determine 
if  the  trends  in  the  pre-war  years  are  being  maintained  on  the  same  level 
in  the  post-war  years. 

A  part  of  the  change  in  prices  from  year  to  year  is  due  to  changes  in 
the  value  of  money.  Since  there  is  no  good  reason  for  assuming  that  there 
is  a  relationship  between  changes  in  hog  production  and  changes  in  the 
value  of  money,  the  proportion  of  the  change  in  the  price  due  to  this 
factor  should  be  eliminated.  The  usual  method  of  correcting  a  price 
series  for  the  price  level  is  to  divide  the  particular  price  by  an  index 


552  BULLETIN  No.  293  [June, 

number  of  all  commodity  prices.  Since  ratios  rather  than  actual  prices 
are  used  in  this  analysis,  this  correction  is  unnecessary. 

Having  assembled  and  tested  qualitatively  (by  dot  charts)  the 
various  factors  which  appear  to  be  closely  related  to  receipts  of  hogs, 
our  next  problem  was  to  determine  the  quantitative  relations  subsisting 
among  these  factors.  Qualitative  analyses  are  important  in  testing 
out  factors  and  suggesting  relationships,  yet  they  fall  short  in  showing 
the  degree  of  relationship  existing  among  variables.  For  this  purpose  a 
quantitative  measure  of  relationship  is  needed. 

Gross  or  zero  order  correlation  between  two  variables  determines 
what  values  of  one  variable  may  be  expected  to  accompany  given  values 
of  the  other,  and  further  shows  how  close  the  relationship  is.  In  studies  in 
which  the  changes  in  one  variable  are  the  result  of  unit  changes  in  a  single 
other  variable  the  coefficient  of  gross  correlation  gives  satisfactory  re- 
sults. However,  there  are  few  problems  in  which  such  a  relationship 
exists.  It  usually  happens,  particularly  in  economic  data,  that  changes 
in  the  dependent  variable  are  the  result,  not  of  a  single  independent 
variable,  but  of  numerous  independent  variables  operating  simultan- 
eously. For  such  problems  gross  correlation  is  inadequate.  The  method  of 
multiple  and  partial  correlation  has  been  devised  for  problems  of  this 
kind. 

In  analyzing  results  affected  by  a  large  number  of  different  factors, 
the  method  of  partial  correlation  is  about  the  only  one  which  gives 
valid  and  definite  quantitative  results.  In  the  method  devised  by  Messrs. 
Tolley  and  Ezekiel1  each  record  is  considered  as  an  observation  equation 
of  the  form: 

Xl   =    a  -\-  &12.3456   .    .   nXz  +  &13.2456   .    .   n  Xz  +  614.2806   .    .  n  X*  ~T"  6l5.2346   .    .   n. 
Xs  -j-  &16.2345   .    .   n  XQ  +  .     .    . 

In  which  X\,  X2,  X3,  X*,  etc.,  are  the  known  quantities  and  a,  612.3456  .  .  n, 
6i3.2456  .  .  n,  614 .2356  .  .  n,  etc.,  the  unknown  quantities  to  be  determined. 
There  is  one  such  equation  for  each  set  of  observations.  Since  there 
is  no  one  set  of  values  of  the  unknowns  which  will  satisfy  all  the  equa- 
tions, it  becomes  necessary  to  find  that  set  of  values  which  most  nearly 
satisfies  all  the  equations.  If  we  assume  that  the  set  of  values  which 
makes  the  sum  of  the  squares  of  the  residuals  a  minimum  is  the  set 
which  most  nearly  satisfies  all  the  equations,  then  the  unknowns  can  be 
found  by  the  formation  and  solution  of  normal  equations.  The  normal 
equations  formed  from  such  observation  equations  are  of  the  form : 


1A  method  of  handling  multiple  correlation  problems.  H.  R.  Tolley  and  M.  J.  B. 
Ezekiel.    Jour.  Amer.  Statis.  Assoc.  18  (n.s.  144),  993-1003.    1923. 


1927] 

2  (Xi)  =  A/a  +  2 


STATISTICAL  APPENDIX 

&12.84  .   .  n  +  2  (Xs)  I 


553 


2  XiXi  =  2  (X2)  a  +  2  PQ2  612.34  .  .  „  +  2 

4)  6  i4.23   .   .  n  + 


.  .  «  +.  2  (X4)  6  14.23  . 
X3)  6  13.24  .  .  .  + 


:,  =  2  (Ar3)  a  +  2  (XsX,)  &i2.34  .  .  »  +  Z  (X3)2  613.24  .  .  n  + 

S/  T7"     "V"    \    1^  I 

^A3A4;  0  i4.23  .  .  n  T 

S/  \r   xr  \    ^  fV  \  si     l     V  /  V     V  N  k  i     v  ^  V  V  ^  J>  I 

^•"•I'Ai/   —  — '  ^A4//  Ct  ~f  ^  V-A2  A4y  0  12.34  .   .  n     I     ^  (,A.3A4/)  0i3.24  .   .  n  "T~ 

2(Z4)2614.23.  .„. 

There  will  be  as  many  normal  equations  as  there  are  unknown 
quantities  to  be  determined  and  they  are  solved  as  ordinary  simultaneous 
equations  for  the  unknown  quantities  of, 


a,  &12.3 


&14.23  .  .  n,  etc. 


Following  the  method  sketched  above,  normal  equations  were 
formed  and  solved  for  the  unknowns.  The  results  were  as  found  in 
Table  2. 

EXPLANATION  OF  RESULTS  IN  TABLE  2 

It  will  be  noted  that  there  is  a  considerable  range  in  the  size  of  the 
coefficients  of  net  regression;  also  that  some  of  them  are  positive  and 
others  negative  in  sign.  These  coefficients  of  net  regression  show  the 
amount  of  change  in  the  dependent  variable  associated  with  a  unit 
change  in  each  of  the  independent  variables. 

Thus  the  table  shows  that  when  there  was  a  1  percent  change  in  X2 
(the  December  corn-hog  ratio)  from  normal,  there  was  .41405  percent 
change  in  receipts  of  hogs  at  Chicago  from  the  preceding  year.  In  the 
case  of  X9  (loss  from  disease),  on  the  other  hand,  an  increase  of  1  per- 
cent in  disease  loss  resulted  in  a  decrease  of  — .03064  percent  in  receipts. 


TABLE  2. — RELATIVE  EFFECT  OF  VARIOUS  INDEPENDENT  FACTORS  UPON  RECEIPTS 
(ASSUMING  LINEAR  REGRESSION)1 


Coefficient  of  net  regression 

Coefficient  of 
determination 
(percent) 

Variable 

Of  Xi  on  variable 

Xi...                     

.41403 
.61526 
-  .  17700 
.29517 
.  12407 
-.04939 
.00364 
-.03064 
.  18575 

35.4 
38.1 
-11.5 
11.5 
6.8 
-  1.73 
-      .4 
-  2.2 
3.6 

_X3          

X\  

X5     

Xt  

^7     

Xi  

x»   

Xu  

'The  coefficient  of  multiple  correlation  R  =  .89. 


554  BULLETIN  No.  293  [June, 

The  relative  effect  of  the  other  independent  variables  upon  receipts  may 
be  obtained  in  a  similar  way.  The  reader  should  remember  that  the 
coefficients  of  net  regression  in  every  case  are  in  percentage  and  indicate 
the  percentage  change  in  receipts  accompanying  or  resulting  from  a  1 
percent  change  in  each  independent  variable. 

In  the  second  column  of  Table  2  are  shown  the  coefficients  of 
determination  for  each  one  of  the  independent  variables.  These  co- 
efficients of  determination  show  approximately  the  relative  effect  of  each 
of  the  independent  variables  upon  receipts.  Since  their  meaning  and 
method  of  computation  may  not  be  generally  understood,  it  may  be  well 
to  discuss  them  briefly. 

MEANING  AND  SIGNIFICANCE  OF  COEFFICIENTS  OF  DETERMINATION 

The  ideal  method  of  scientific  investigation  is  to  hold  constant 
all  the  factors  affecting  a  particular  resultant  except  the  one  under 
direct  observation,  a  measure  of  whose  effect  is  desired.  While  in  the 
natural  sciences  this  condition  may  be  fully  realized,  in  the  social 
sciences  it  is  an  ideal  rarely  if  ever  attained.  It  usually  happens  that, 
instead  of  having  to  measure  the  effect  of  one  factor  in  which  the  effect 
of  all  other  factors  has  been  eliminated,  the  investigator,  dealing  with 
economic  problems,  has  to  attempt  to  measure  the  influence  of  a  single 
factor  in  which  all  other  factors  are  operating  simultaneously.  Further, 
these  independent  or  "causal"  factors  may  be  very  closely  interrelated 
and  the  net  influence  of  each  factor  consequently  be  very  difficult  to 
determine.  About  the  only  method  of  analysis  for  problems  such  as 
this  is  that  of  multiple  and  partial  correlation.  The  coefficient  of  multi- 
ple correlation,  however,  will  show  only  the  degree  of  relationship  sub- 
sisting between  the  dependent  variable  and  all  the  independent  vari- 
ables, that  is,  it  gives  the  resultant  of  all  connecting  paths  of  influence. 
Another  measure  is  needed  which  will  show  the  direct  influence  along 
each  separate  path  in  such  a  multi-variable  problem.  Dr.  Sewall  Wright1 
derived  such  a  measure  which  he  termed  a  path  coefficient.  The  path 
coefficient  is  really  the  coefficient  of  net  regression  expressed  in  terms 

of  unit  standard  deviation.  Thus  &i2  34       n—  =  /3i2  34       „  where  &i2  34      n 

01 

is  the  coefficient  of  net  regression,  a2  and  <TI,  the  respective  standard 
deviations  and  /3i2.34  .  .  n  the  path  coefficient. 

B.  B.  Smith2  has  shown  how  this  coefficient  of  determination  could 
be  derived  directly  from  a  least-square  treatment  of  multiple  correla- 
tion. Thus : 


Correlation  and  causation.   Jour.  Agr.  Res.  20,  557-585.    1921. 
"Forecasting  the  acreage  of  cotton.    Jour.  Amer.  Statis.  Assoc.  20  (n.s.  149). 
31-47.   1925. 


1927]  STATISTICAL  APPENDIX  555 

012.34    .     .    n    Pn       , 

«i2.34  .  .  n  =  --  o—    -  where 

<Ti2 

di2.34  .  .  n  =  coefficient  of  determination  of  variable  2  by  variable  1 
holding  constant  variables  3,  4,  5,  etc., 

012.34  .  .  n  =  the  net  regression  of  variable  1  on  2, 

PW  =  gross  product  moment  of  variables  1  and  2, 

<ri2  =  squared  standard  deviation  of  dependent  variable  1. 

The  coefficient  of  determination  of  each  of  the  other  independent 
variables  is  derived  in  the  same  way.  The  total  determination  of  all 
the  independent  variables  combined  is  the  sum  of  their  percentage  deter- 
minations, or  it  is  equivalent  to  the  square  of  R,  the  coefficient  of  mul- 
tiple correlation. 

While  this  method  of  deriving  the  coefficients  of  determination 
shows  the  relative  net  effect  of  each  independent  variable  upon  the  de- 
pendent, it  does  not  show  how  much  of  this  determination  is  due  directly 
to  the  variation  in  the  particular  independent  alone  and  how  much  is 
due  to  variations  in  the  other  independents  working  thru  it.  Or  in  other 
words,  it  does  not  divide  the  total  determination  imputed  to  each  inde- 
pendent into  the  amount  of  determination  which  is  direct  and  the  amount 
which  is  joint. 

Mr.  H.  R.  Tolley  of  the  Bureau  of  Agricultural  Economics,  U.  S. 
Department  of  Agriculture,  has  worked  out  a  method  (unpublished) 
showing  how  this  determination  is  distributed  as  between  the  direct 
and  joint  effects.  Thus: 

dl2.  34   .   .  n    =    7*12  012.34  .    .   n 

012.34  .   .  n       •  Pl2 

=  pn  .  -  -  since  -   -  =  ri2  and 

<Tl2  (7102 

,  *2 

012.34   .    .  n  —    P12.34   .    .  n 

<Tl 

But  ^12   =  <T22Ol2.34   .   .  n  +  P23  013.24  .   .  n  +  ?>24  &14.23   .   .  n 
Pl2  •  012.34   .    .  n  022  O2  12.34  .  .  n 

34.  .n  —  ~        —  —  —  «  — 


P23  &13.24  .  .  n  '  &12.34  .    .  n     ,      ?>24  &14.23   .   .  n  '  &12.34  .  .  n 


0V 


022&212.34  .   .  n  .„  J  I  r 

But  -  -    =  /T12.34  .    .  n  and  p23  Oi3.24  012.34  =   ^23  Pl3  Pl2 


556  BULLETIN  No.  293  [June, 

since  p23  =  r23  <r2  <r3 

<TI 

013.24   .    .   n     =    P13.24  .  .  n~~ 
03 

&12.34   .    .   n     =    /3l2.34  .  .  n  ~ 
0-2 

™,  P23  &13.24    .    .    n  &12.34   .    .   n  ^23  0"2  0"3  fa  0"l  ^12  ^1 

Then  -  -  =  -  -  =  r23  fa  fa 

0"!  01  (Ts  (r2 

Likewise,  p24  614.23  .  .  n  612.34  .  .  „  =  r24  fa  fa 
Then  finally, 

dl2.34  .    .  n   =   /3212.34   .    .   n  +  r23  j8i8  012  +  f24  |8l4  j8i2  +  .    .    . 

or  in  words,  the  coefficient  of  determination  of  variable  2  on  vari- 
able 1  in  which  variables  3,  4,  5,  etc.,  are  held  constant,  is  the  sum  of  the 
square  of  the  path  coefficient,  /32i2.34  .  .  „  (the  direct  path  of  influence 
from  2  to  1),  plus  the  sum  of  the  joint  paths  of  influence  of  variables  3 
and  4  working  thru  variable  2,  viz., 

r23  flu  fa  +  r24  fa  fa. 

J  The  sign  of  the  direct  determination  will  always  be  positive  since 
it  is  equivalent  to  the  square  of  the  path  coefficient.  When  the  sum  of 
the  joint  determinations  is  larger  negatively  than  the  direct  determina- 
tion, then  the  coefficient  of  determination  will  be  negative. 

It  will  be  noted  from  Table  2  that  some  of  the  coefficients  of  de- 
termination are  negative.  This  means  that  the  tendency  for  each  of 
these  variables  to  cause  the  dependent  variable  to  move  positively  with 
it  is  overshadowed  or  overpowered  by  the  force  of  the  other  independent 
variables,  causing  it  to  move  in  the  opposite  direction;  consequently 
the  total  determination  due  to  this  independent  variable  becomes 
negative.  Table  3  shows  the  percentage  determination  due  directly 
to  each  independent  and  the  amount  of  joint  determination  resulting 
from  the  other  variables  working  thru  each  one. 

In  the  formation  and  solution  of  these  normal  equations  there 
was  assumed  to  be  linear  regression  between  the  dependent  and  the 
various  independent  variables.  That  is,  the  amount  of  change  in  the 
dependent  variable  associated  with  a  given  change  in  the  independent 
variable  is  constant  for  all  values  on  the  independent  scale.  Such  an 
assumption  it  was  felt,  however,  did  not  correspond  to  what  one  would 


1927] 


STATISTICAL  APPENDIX 


557 


theoretically  expect.  The  hypothesis  was  rather  that  receipts  would 
not  increase  in  a  constant  ratio  with  given  increases  in  the  corn-hog 
ratio,  climatic  conditions  at  farrowing  time,  etc.,  but  would  tend  to  slow 
up  in  the  upper  range.  That  is,  when  the  corn-hog  ratio  became  very 
high,  it  was  believed  that  additional  changes  upward  would  not  have 
the  same  influence  upon  receipts  as  such  a  change  would  have  when 
the  ratio  was  not  so  high,  for  the  reason  that  some  farmers  will  begin  to 
curtail  production  somewhat  thru  fear  of  overdoing  the  thing  and  also 
because  of  the  sheer  inability  of  increasing  production  indefinitely  be- 
cause of  limitations  of  capital,  equipment,  etc.  In  other  words,  it  was 
felt  that  the  curve  of  increase  in  receipts  would  begin  to  flatten  out  in 
the  upper  range  and  that  the  regression  of  receipts,  upon  some  of  the 
independent  variables  at  least,  would  be  curvilinear  instead  of  linear. 


TABLE  3. — COEFFICIENTS  SHOWING  THE  PERCENTAGE  (TOTAL,  DIRECT,  AND  JOINT) 
DETERMINATION  OF  EACH  INDEPENDENT  VARIABLE  ON  X\ 
(LINEAR  REGRESSION) 


Variable 

Total 

Direct 

Joint 

Xi.  .  . 

35  4 

32.74 

2.66 

Xt  

38  1 

34  32 

3.78 

Xi... 

—  11  5 

8.68 

-20.18 

•jis  

11.6 

13.79 

-  2.19 

Xe  

6  8 

6.24 

.56 

XT... 

—   1.7 

.42 

-  2.12 

X*  

-      .4 

.08 

-      .48 

Xi  

—  2  2 

2.68 

-  4.88 

Xio  

3.6 

.76 

2.84 

It  will  be  noted  that  the  relationship  between  X7,  X$,  X9,  XIQ, 
and  Xi  is  of  relatively  little  significance.  For  this  reason  these  variables 
were  dropped  and  only  the  other  five  used  in  the  final  solution. 

The  problem  now  became  one  of  determining  whether  or  not  the 
relationships  were  curvilinear,  and  if  so  to  measure  them  quantitatively. 
The  method  of  determining  the  index  of  multiple  curvilinear  correlation 
worked  out  by  Mr.  Ezekiel  of  the  Bureau  of  Agricultural  Economics, 
U.  S.  Department  of  Agriculture1  was  followed. 


MEANING  AND  METHOD  OF  COMPUTING  THE  INDEX  OF  MULTILPLE 
CURVILINEAR  CORRELATION 

Having  obtained  the  constants  in  the  multiple  linear  regression  or 
"predicting"  equation  of  the  form  X\  =  a  +  62  X%  +  63  ^3  +  &4  X^  + 


1A  method  of  handling  curvilinear  correlation  for  any  number  of  variables.  Mor- 
decai  Ezekiel.   Jour.  Amer.  Statis.  Assoc.  19  (n.s.  148),  431-453.   1924. 


558  BULLETIN  No.  293  [June, 

.  .  .  bnXn,  residuals  were  calculated  for  each  observation  equation  by 
the  following  formula: 

e  =  Xt-  X\ 

or  =  Xi  -  (a  +  62X2  +  63^3  +  64*4  +  .  .  .  bnXn) 

in  which  e  =  residual  sought,  Xi  =  original  observation,  and  X\  =  esti- 
mate of  A'i  made  by  using  the  linear  predicting  equation.  Thus  each 
residual  shows  the  extent  to  which  each  observed  value  of  X\  differs 
from  the  value  computed  from  the  estimating  equation. 

Now  if  the  true  regression  between  X\  and  the  other  independent 
variables  is  curvilinear  rather  than  linear,  all  this  equation  can  do  is 
to  show  the  linear  relation  subsisting  between  them,  neglecting  alto- 
gether the  curvilinear  effect.  If  the  residuals  as  calculated  above  are 
plotted  as  vertical  deviations  from  the  net  regression  line  of  each  of  the 
independent  variables  arrayed  on  the  dependent  variable  X\,  a  curve 
drawn  thru  the  average  of  the  arrayed  residuals  will  give  an  indication 
of  the  net  curvilinear  regression  of  each  independent  variable  upon  the 
dependent.  This  may  be  considered  the  first  approximation  of  the  true 
curvilinear  regression.  Using  this  curve,  new  residuals  (e'}  were  com- 
puted by  the  use  of  the  formula — 

e'  =  Xl  -  (K'  +  F'  (Xz}  +  F'  (X3)  +  F'  (X4)  +  ..)... 

in -which  F'X2,  F'X3,  F'X^,  etc.,  represent  values  read  from  the  first 
approximation  curve  and  the  curve  drawn  thru  the  average  of  these 
arrayed  residuals  gave  the  second  approximation  of  the  true  curvilinear 
regression  between  the  dependent  and  each  independent  variable. 

The  second  approximation  curves  were  used  to  compute  third 
residuals  e"  by  the  formula: 

e"  =  Xi  -  K"  -  F"  (X2)  +  F"  (X8)  +  F"  (Xj  +  .  .  . 

and  the  new  residuals  used  to  ascertain  the  third  curve  approximating 
the  true  curvilinear  regression  as  in  the  preceding  case.  The  process 
might  have  been  repeated  and  new  residuals  computed  to  still  further 
correct  the  curves,  but  it  was  felt  there  would  be  little  gained  by  fur- 
ther extension.  Table  4  shows  the  values  used  in  the  final  correlation. 
The  functional  values  in  Table  4  are  the  curvilinear  equivalents 
of  the  linear  values  of  each  independent  variable  and  are  the  values 
determining  the  shape  of  the  curve  of  regression  in  each  case.  They 
were  read  direct  from  the  curves  of  regression  of  receipts  upon  each  one 
of  the  independent  variables. 


1927] 


STATISTICAL  APPENDIX 


559 


TABLE  4. — FUNCTIONAL  VALUES  OF  INDEPENDENT  VARIABLES  READ  FROM  THIRD 
APPROXIMATION  CURVES  AND  USED  FOR  FINAL  CORRELATION  SOLUTION 


F"Xt 

F"Xs 

F"Xt 

F"X5 

F"Xt 

XV 

109  .  .  . 

110 

99 

97 

95 

105 

93  

105 

101 

102 

96 

91 

109  

109 

99 

97 

97 

101 

107  

108 

99 

103 

98 

109 

94  

100 

101 

97 

98 

84 

107  

105 

99 

102 

99 

104 

99  

100 

101 

101 

100 

98 

95  

92 

101 

116 

100 

102 

98  

92 

99 

97 

101 

91 

110  

108 

99 

96 

102 

112 

86  

92 

116 

107 

102 

101 

94  

77 

102 

97 

103 

70 

109  

109 

99 

103 

104 

116 

112  

115 

99 

97 

104 

119 

92  

92 

104 

97 

105 

90 

112  

103 

99 

100 

106 

108 

101  

105 

100 

97 

106 

99 

100  

99 

107 

116 

107 

123 

lXi  is  the  dependent  variable,  and  the  values  shown  for  it  represent  actual  percentage  changes  in 
receipts  at  Chicago. 


Using  the  curvilinear  equivalents  of  the  independent  variables 
Xz,  X3,  X4,  X,  designated  as:  F"  (X2)  F"  (X3)  -  F"  (X4).  F"  (X,), 
and  using  the  linear  function  of  X6  as  the  other  independent,  the 
following  results  were  secured  when  correlating  with  Xi  (receipts) : 
The  index  of  multiple  correlation  (corrected)  was  .983.  Standard 

j: 


error  of  estimate  = 


=  .0241  =  2.41  percent. 


The  final  estimating  or  "predicting"  equation  decoded  and  in 
terms  of  functional  values  becomes: 


i  =  .95626  F"  Z2  +  .79962  F"  X3  +  1.05910  F 
.92089  F"Ar6  +  384.8491. 


1.05714  F"  Xb  + 


RELATIVE  IMPORTANCE  OF  THE  FACTORS  DETERMINING  SUPPLY 

In  Table  5  are  shown  the  coefficients  of  net  regression  of  receipts 
upon  each  independent  variable  and  of  each  independent  variable  upon 
receipts;  also  the  gross  and  net  coefficients  of  correlation  are  shown. 
While  the  coefficients  of  net  regression  show  the  amount  of  change  in 
the  dependent  variable  accompanying  or  resulting  in  given  changes  in 
each  independent  variable  and  the  coefficients  of  correlation  show 
what  the  degree  of  relationship  is,  they  do  not  show  the  amount  of 
determination  due  to  each  factor. 

In  Table  6  are  shown  the  coefficients  of  determination.  It  will  be 
noted  that  in  addition  to  the  total  determination  is  shown  the  amount 
of  determination  which  is  direct  and  the  amount  which  is  joint.  They 


BrixETts  Xo.  293 


Y.-,-. 


have  been  computed  in  the  same  way  as  those  shown  in  a  former  table 
(see  page  553) 

A  little  more  than  70  percent  (72.1  percent)  of  the  variation  in  re- 
ceipts of  hogs  at  Chicago  for  the  period  from  1898  to  1916  could  be  ac- 
counted for  by  three  corn-hog  ratios  "lagged"  at  varying  periods. 


TABLE  5. — COEFFICIENTS  OF  NET  REGRESSION  AND  OF  GROSS 
NET  CORRET.  \TION 


Coeffexent  of  net  regression 


Coefficient  of  correlation 

of  variable  with  Xi 


VanflVfe 

Of  JC  oa  TariabJe 

Variable  on  X 

Net 

Gross 

.xx.  . 

-V_- 

.S472O 

.90 

.60 

i  . 

.79962 

1.051S6 

.917 

.67 

£ 

1.05910 

.83327 

•a 

-.037 

x\... 

1.05714 

.6088O 

939 

.39 

X,  

.92069 

.70120 

.S04 

27 

Apparently  farmers  are  influenced  in  their  breeding  operations  more 
by  the  relationship  between  corn  and  hog  prices  than  by  any  other  one 
thing.  The  relation  between  corn  and  hog  prices  in  December  at  the 


TABLE  6. — COEFFICIENTS  SHOWING  THE  PERCENTAGE  (TOTAL,  DIRECT  AND  Jonsr) 
DETERMINATION  OF  EACH  INDEPENDENT  VARIABLE  ON  JTi 

(CURVILINEAR  REGRESSION) 


Variable 

Total                       Direct                        Jc 

lint 

X-... 

36.9                        37.20                       - 

42 

It  

36.4                         29.  So                           6 

55 

x» 

—     1.2                         11  28                      —12 

48 

ft:  .. 

18.7                         23.65                        —4 

95 

Xt  

6.7                           6.13 

57 

time  of  breeding  for  spring  litters  and  the  relation  for  the  six  months 
preceding  breeding  had  the  greatest  influence  upon  breeding  operations. 
Climatic  conditions  at  farrowing  time  was  the  third  most  important 
factor  influencing  receipts.  In  this  analysis  this  factor  accounted  for 
about  18  percent  of  the  variation  in  receipts. 

The  other  factors,  the  relation  between  hog  and  steer  prices,  size 
of  the  corn  crop  or  percentage  of  non-merchantable  corn,  number  of 
sows  available  for  breeding  stock,  etc.,  were  of  minor  importance  so  far 
as  this  analysis  indicated.  While  there  was  found  to  be  some  relationship 
between  each  of  these  factors  and  receipts,  it  was  of  negligible  significance 
as  compared  with  the  important  influence  of  the  corn-hog  ratios  and 
climatic  conditions  at  farrowing  time.  Table  3,  page  557,  shows  the  net 
effect  of  each  upon  receipts. 


1927}  STATISTICAL  APPENDIX  561 

ABE  THE  CoHX-Hoc  RATIOS  "INDEPENDENT  FACTORS"  OH  ABE  THEY 
THBEE  MEASUBES  or  THE  SAME  INFLUENCE? 

Some  doubt  may  have  arisen  in  the  mind  of  the  reader  whether 
the  three  corn-hog  ratios  are  really  independent  variables  or  whether 
they  are  really  three  measures  of  the  same  thing.  The  answer  to  this 
involves  largely  what  is  meant  by  "independent  variables," 

Independence  in  the  statistical  sense  may  be  viewed  from  the 
standpoint  of  (a)  the  relationship  between  a  particular  resultant  and 
certain  factor  or  factors  assumed  to  influence  this  resultant,  and  (b) 
the  relationship  between  one  particular  "causal"  factor  and  other 
"causal"  factors  operating  simultaneously.  It  is  in  the  former  sense, 
however,  to  which  greatest  significance  is  to  be  attached.  In  both 
senses  there  may  be  a  gradation  in  relationship  ranging  from  com- 
plete independence  (no  relationship)  to  complete  dependence  (perfect 
relationship.) 

TABLE  7. — EFFECT  UPON  COEFFICIENTS  OF  CORRELATION  AND  DETERMINATION  OF 
DROPPING  CEKTAIN  OF  THE  CORN-HOG  RATIOS 


Independent  variables 

Dependent 
variable 

Index 
of  multiple 

cccreiation 

- 
determination 

Ti 

Xi,  X*,  Xi,  Xt.  . 

Xi 

-,v 

9750 

Ti 

X»,  Xt,  X«  

Xi 

.965 

Tj, 

X*,  Xi,  Xe  

Xi 

833 

X*.   Xi,  Xt  

Xi 

.919 

.8453 

Where  Xi  =  Receipts  of  bogs  at  Oocag 
i":  =  December  oom  ikog  ratio  • 

0. 

bs. 

!• 

X«  —  Average  January  to  Ifani 
Xr  =  Index  of  climate  at  farrowi 
Xt  =  Time  or  trend. 

Liil  1  l«lHiA* 

It  is  possible  to  have  high  gross  correlation  between  a  particular 
independent  and  dependent  factor,  yet  when  other  independent  factors 
are  used,  the  net  effect  of  the  first  independent  factor  be  niL  This 
would  arise  in  case  there  happened  to  be  very  high  correlation  between 
this  particular  factor  and  the  other  independent  factors.  It  is  because 
of  this  fact  that  coefficients  of  gross  correlation  must  be  accepted  with 
caution. 

When  a  particular  variable  is  used  in  a  multiple-correlation  analysis, 
the  inference  is  that  this  factor  has  a  net  influence  on  the  dependent 
apart  from  and  in  addition  to  the  other  factors  used.  Or  in  other  words, 
if  when  using  this  factor  the  coefficients  of  multiple  correlation  and 
determination  are  increased,  then  we  may  conclude  that  this  factor  is  an 
independent  factor.  Conversely,  if  these  coefficients  are  not  increased 
when  this  factor  is  added,  its  net  effect  may  be  considered  niL 


562  BULLETIN  No.  293  [June, 

Using  this  as  a  criterion,  an  analysis  was  made  of  the  question  of 
whether  the  three  corn-hog  ratios  are  really  independent  factors,  with 
the  results  observed  in  Table  7. 

It  will  be  noted  from  this  table  that  the  index  of  multiple  curvilinear 
correlation  and  the  coefficient  of  determination  are  reduced  when  any 
of  the  corn-hog  ratios  are  dropped  out.  Or  in  other  words,  it  is  possible 
to  explain  a  larger  proportion  of  the  variability  in  receipts  using  all  three 
of  the  corn-hog  ratios  along  with  the  other  two  factors  than  can  be 
explained  when  any  of  the  ratios  are  dropped. 

EFFECT  OF  OATS-HOG  RATIO,  BARLEY-HOG  RATIO,  ETC.,  UPON  RECEIPTS 

In  the  context  allusion  was  made  to  the  possible  effect  which  an 
oats-hog  ratio,  barley-hog  ratio,  and  wheat-hog  ratio  would  have  upon 
receipts.  The  hypothesis,  as  set  forth  then,  was  that  they  likely  would 
have  no  effect  because  they  would  be  so  highly  correlated  with  the 
corn-hog  ratio  that  when  those  inter-correlations  were  taken  into  account 
and  corrected  for,  their  net  effect  would  be  nil. 

Recently  Mr.  E.  M.  Daggit  of  the  Bureau  of  Agricultural  Eco- 
nomics of  the  U.  S.  Department  of  Agriculture  has  had  occasion  to 
test  out  the  influence  of  these  various  ratios  upon  receipts  of  hogs 
at  Chicago,  and  his  results  support  the  hypothesis  made  above.1  He 
found  there  was  a  gross  correlation  between  all  these  ratios  and  receipts 
of  hogs  at  Chicago.  The  coefficients  of  gross  correlation  varied  from  .3 
and  .5  for  the  wheat-hog  ratio  and  barley-hog  ratio  respectively  to  .75 
for  the  oats-hog  ratio.  Considerable  gross  correlation  was  to  be  expected 
because  hog  prices  are  used  in  calculating  each  of  these  ratios  and  there 
is  a  close  correlation  between  hog  prices  and  hog  receipts.  But  when 
these  ratios  were  included,  along  with  the  corn-hog  ratios  and  other 
factors  influencing  receipts,  as  independent  variables  in  a  multiple- 
correlation  solution,  and  the  intercorrelations  determined  and  corrected 
for,  it  was  found  that  the  net  influence  of  these  ratios  was  nil.  In  other 
words,  they  did  not  increase  the  coefficient  of  multiple  correlation  be- 
yond what  it  was  when  they  were  used,  nor  did  they  reduce  the  standard 
error  of  estimate,  both  of  which  would  have  been  necessary  if  they  had 
had  an  added  effect. 

Do  CHANGES  IN  HOG  PRICES  AFFECT  RECEIPTS  EARLIER  THAN 
CHANGES  IN  THE  CORN-HOG  RATIO? 

The  hypothesis  has  been  advanced  that  changes  in  hog  prices 
affect  hog  receipts  earlier  than  do  changes  in  the  corn-hog  ratio.  A 

^Tnpublished. 


1927] 


STATISTICAL  APPENDIX 


563 


number  of  multiple-correlation  analyses  were  made  in  order  to  test 
this  out,  also  to  determine  if  hog  prices,  lagged  for  longer  periods 
and  used  as  additional  variables,  along  with  the  three  corn-hog  ratios 
and  other  variables,  would  make  possible  a  more  accurate  estimate  of 
receipts. 

Assuming  linear  relations,  hog  prices  (lagged  first  20  months  and 
then  23  months)  were  used  as  an  additional  variable  and  included 
along  with  the  three  corn-hog  ratios  (lagged  12  to  18  months,  9  to  15 
months,  and  6  to  12  months  respectively),  the  index  of  climate,  and 
trend,  and  were  correlated  with  receipts.  The  results  were  as  found  in 
Table  8. 

It  will  be  noted  that  when  hog  prices,  lagged  for  the  periods  indi- 
cated, are  added  as  independent  variables,  the  coefficient  of  corre- 
lation is  increased  from  .88  to  .882  when  hog  prices  from  November  to 
March  are  used,  and  to  .884  when  January  to  April  hog  prices  are  used. 


TABLE  8. — EFFECT  UPON  COEFFICIENTS  OF  CORRELATION  AND  DETERMINATION  OF 
HOG  PRICES  LAGGED  FOR  LONGER  PERIODS  AS  ADDITIONAL  FACTORS 


Independent  variables 

Dependent 
variable 

Coefficient 
of  multiple 
correlation 

Coefficient 
of 
determination 

X 

.88 

.7780 

X 

882 

.7784 

X 

.884 

.7822 

Where  Xi  =  Receipts  of  hogs  at  Chicago. 

Xt  =  December  corn-hog  ratio,  lagged  9  to  15  months. 

X*  =  Average  June  to  November  corn-hog  ratio,  lagged  12  to  18  months. 

X4  =  Average  January  to  March  corn-hog  ratio,  lagged  6  to  12  months. 

Xi  —  Index  of  climate  at  farrowing  time. 

Xt  =  Trend  or  time. 

Xn  =  Hog  prices  (deflated)  January  to  April,  lagged  20  to  22  months. 
Xn  =  Hog  prices  (deflated)  November  to  March,  lagged  22  to  24  months. 

While  the  use  of  hog  prices,  lagged  as  indicated,  does  increase  slightly 
the  accuracy  with  which  an  estimate  of  receipts  might  be  made,  the 
effect  is  so  slight  as  to  be  practically  negligible. 

There  is  a  gross  correlation  of  .586  between  receipts  and  hog  prices 
lagged  20  to  22  months.  When  this  factor  is  included  as  an  independent 
variable  along  with  other  independent  factors  and  the  intercorrelations 
are  determined  and  corrected  for,  the  net  coefficient  of  correlation 
drops  to  .13,  indicating  the  small  net  effect  it  really  has  in  addition  to 
the  other  factors. 

These  results  are  of  interest  in  indicating  that  changes  in  hog 
prices  do  seem  to  affect  subsequent  receipts  earlier  than  do  changes  in 
the  corn-hog  ratio;  also  possibly  in  providing  a  basis  for  estimating 
receipts  earlier  than  is  possible  when  using  the  corn-hog  ratios. 

While  it  is  possible  to  estimate  receipts  considerably  earlier  by 
using  hog  prices  alone,  the  estimate  is  not  very  trustworthy.  This  is 


564 


BULLETIN  No.  293 


[June, 


indicated  by  the  fact  that  when  using  hog  prices  (lagged  20  to  22  months) 
and  trend  as  independent  factors,  and  correlating  with  receipts,  a 
coefficient  of  multiple  correlation  of  only  .623  is  obtained.  Or  in  other 
words,  it  is  possible  to  explain  only  38.81  percent  of  the  variability  in 
receipts  by  using  these  factors.  This  is  better  than  a  guess,  of  course, 
but  does  not  give  an  estimate  nearly  so  accurate  as  can  be  made  when 
the  corn-hog  ratios  are  used. 

COEFFICIENT  OF  ELASTICITY  OF  SUPPLY  OF  HOGS  IN 
CHICAGO  MARKET 

From  the  foregoing  results  and  from  the  tables  presented  in  the 
context,  coefficients  of  elasticity  of  supply  may  be  calculated  at  once. 
Elasticity  of  supply  as  used  here  may  be  defined  as  the  relation  between 
changes  in  price  and  changes  in  subsequent  output,  and  further,  the 
coefficient  of  elasticity  of  supply  as  the  ratio  of  the  increase  in  supply 
to  the  previous  supply  divided  by  the  ratio  of  the  increase  in  price  to  the 
previous  price.  The  coefficients  of  elasticity  for  the  three  ratios  were  as 
found  in  Table  9. 

TABLE  9. — COEFFICIENTS  OF  ELASTICITY  OF  SUPPLY1  OF  HOGS 


When  the  December  corn-hog  ratio  lagged  9  to 
15  months  was  — 
10  to  30%  below  normal  

The  coefficient  of  elasticity  of  supply  was  — 

.63 
.58 
.23 

10%  below  to  10%  above  normal  

)    10  to  30%  above  normal  

When  the  average  June  to  November  corn-hog 
ratio  lagged  12  to  18  months  was  — 
10  to  30%  below  normal  

The  coefficient  of  elasticity  of  supply  was  — 

1.06 
.72 
.33 

10%  above  to  10%  below  normal  

10  to  30%  above  normal  

When  the  average  January  to  March  corn-hog 
ratio  lagged  6  to  12  months  was  — 
10  to  30%  below  normal  

The  coefficient  of  elasticity  of  supply  was  — 

.66 
.11 
.05 

10%  below  to  10%  above  normal  

When  the  combined  corn-hog  ratios  lagged  for 
6  to  18  months  were  — 
10  to  30%  below  normal  

The  coefficient  of  elasticity  of  supply  was  — 

.324 
.393 
.167 

10%  below  to  10%  above  normal  

10  to  30%  above  normal  

Percentage  change  in  receipts 

Percentage  change  in  corn-hog  ratio 


From  these  tables  and  from  the  tables  and  charts  presented  in  the 
context  it  should  be  possible,  assuming  farmers  in  this  section  will  react 
in  the  present  and  immediate  future  in  the  same  way  as  they  have  in 
the  past,  to  determine  fairly  accurately  just  about  what  response  in 
production  will  follow  given  changes  in  these  ratios,  and  further,  by 
using  the  index  of  climate  at  farrowing  time  and  trend  as  additional 


1927]  STATISTICAL  APPENDIX  565 

factors,  it  should  be  possible  under  the  same  conditions  to  estimate 
pretty  accurately  about  what  total  production  will  take  place  each  year. 
Of  course  disturbing  factors  will  enter  in  from  time  to  time  which 
will  increase  the  error  of  estimate.  The  pig  survey  recently  inaugurated 
by  the  Bureau  of  Agricultural  Economics,  U.  S.  Department  of  Agri- 
culture, may  prove  to  be  such  a  factor.  It  is  very  probable  that  as 
farmers  come  to  understand  the  purpose  and  meaning  of  this  survey 
they  will  be  inclined  to  respond  somewhat  differently  than  they  have 
done  in  the  past.  It  will  not  be  possible  to  measure  just  what  influence 
this  additional  factor  has  until  it  has  been  in  effect  for  a  considerably 
longer  period  than  at  present.  Other  factors  may  have  a  similar  in- 
fluence or,  if  not  the  same  influence,  may  produce  results  which  will 
tend  to  increase  the  error  of  estimate.  Such  of  these  disturbing  factors 
as  are  capable  of  statistical  treatment,  however,  probably  can  be 
measured  and  corrected  for,  after  a  sufficient  period  has  elapsed  to  make 
their  determination  possible. 

ELASTICITY  OF  THE  SUPPLY  OF  HOGS  IN  DIFFERENT  TYPES-OF-FARMING 

AREAS  IN  ILLINOIS 

Having  determined  the  important  factors  responsible  for  the 
variations  in  receipts  of  hogs  at  Chicago  from  year  to  year,  an  attempt 
next  was  made  to  determine  the  elasticity  of  supply  of  hogs  in  different 
type-of-farming  areas  in  Illinois. 

To  make  such  a  study  necessitated  the  use  of  county  data  on 
hog  production.  The  data  used  were  taken  from  the  State  Department 
of  Agriculture  Reports  and  covered  the  number  of  hogs  on  farms  on 
May  1  in  each  county  from  1898  to  1916.  These  series  include  both 
pigs  farrowed  in  the  fall  and  in  the  spring  and  make  no  distinction  as  to 
sex  or  age.  The  county  data  were  combined  into  regional  or  area  totals 
according  to  the  type-of-farming  map  generally  accepted  in  the  state. 
The  figures  showing  the  variation  in  the  number  of  hogs  on  farms  on 
May  1  each  year  were  assumed  to  indicate  fairly  accurately  the  changes 
in  the  number  of  hogs  on  farms  on  May  1  each  year  in  each  area  and 
were  taken  as  the  dependent  variables  in  each  case.  The  method  of 
analysis  was  that  of  multiple  curvilinear  correlation.  Since  the  technique 
was  the  same  as  used  in  the  preceding  study,  the  various  steps  in  the 
analyses  will  not  be  repeated  here. 

Designating  percentage  changes  of  hogs  on  farms  on  May  1  from 
year  to  year  as  the  dependent  variable  X\  in  east-central  Illinois,  the 
following  independent  variables,  lagged  as  indicated,  were  correlated 
with  it: 


566 


BULLETIN  No.  293 


[June, 


F"XZ  =  Corn-hog  ratio  (December),  lagged  9  to  15  months. 

F"XS  =  Corn-hog  ratio  (average  June  to  November),  lagged  12  to 
18  months. 

F"Xi  —  Corn-hog  ratio  (average  January  to  March),  lagged  6  to 
12  months. 

F"X5  =  Trend. 
The  index  of  multiple  curvilinear  correlation  was  .867. 

In  western  Illinois  the  same  independent  variables  were  used  except 
that  the  corn-hog  ratio  for  June,  lagged  12  to  15  months,  was  used 
instead  of  the  average  ratio  for  June  to  November.  The  functional 
values  used  also  were  read  of  course  from  the  net  regression  line  and 
curves  showing  the  relationship  between  the  various  independents  and 
hogs  on  farms  in  western  Illinois.  The  degree  of  relationship  is  indicated 
by  an  index  of  multiple  curvilinear  correlation  of  .89  which  was  secured. 


TABLE  10. — COEFFICIENTS  OF  ELASTICITY  WITH  VARIOUS  CORN-HOG  RATIOS 


Corn-hog  ratio 

Coefficient  of  elasticity1 

East-Central 
Illinois, 
grain 
section 

Western 
Illinois, 
livestock 
section 

Southwestern 
Illinois, 
wheat 
section 

Northern 
Illinois, 
dairy 
section 

10  to  30%  below  normal         

.37 
.46 
.55 

.086 
.25 
.37 

.097 
.25 
.43 

.15 
.25 
.20 

10%  below  normal  to  10%  above.  . 

)  'Coefficient  of  elasticity 


Percentage  change  in  receipts 
Percentage  changes  in  corn-hog  ratio 


Using  percentage  changes  in  number  of  hogs  on  farms  in  south- 
western Illinois  as  the  dependent  variable,  and  correlating  with  the 
same  independent  variables  used  in  the  east-central  Illinois  study, 
an  index  of  multiple  curvilinear  correlation  of  .917  was  obtained. 

Using  percentage  changes  in  number  of  hogs  on  farms  in  northern 
Illinois  in  the  dairy  district  as  the  dependent  variable,  and  correlating 
with  the  same  independent  variables  used  in  the  preceding  determina- 
tion, an  index  of  multiple  curvilinear  correlation  of  .66  was  secured. 

Tables  were  presented  in  the  main  body  of  the  bulletin  showing 
the  net  relation  between  percentage  changes  in  the  corn-hog  ratios 
(combined)  and  percentage  changes  in  the  number  of  hogs  on  farms  in 
each  type-of-farming  area.  The  coefficients  of  elasticity  were  not  pre- 
sented, however.  They  were  as  found  in  Table  10. 

It  will  be  noted  (Table  10)  that  a  10  percent  change  in  the  corn-hog 
ratio  did  not  result  in  the  same  percentage  change  in  receipts  in  each 
area,  but  varied  widely.  The  coefficients  of  elasticity  also  varied  widely 


STATISTICAL  APPENDIX  567 

according  to  the  particular  level  at  which  the  ratio  stood.  That  is  to  say, 
farmers  in  different  sections,  as  well  as  within  each  section,  responded 
differently  in  their  production  when  the  corn-hog  ratio  was  high  than 
they  did  when  it  was  low.  While  these  results  bear  out  the  hypothesis 
made,  and  conform  very  closely  to  what  theoretically  would  be  expected, 
the  conclusions  reached  here  are  tentative  until  a  more  thoro  statistical 
analysis  can  be  made.  The  index  of  multiple  correlation  is  not  high 
enough  in  one  or  two  of  the  sections,  particularly  in  the  dairy  section, 
to  be  used  with  absolute  confidence. 


UNIVERSITY  OF  ILLINOIS-URBANA 


